AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 2000
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
CENDANT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-0918165
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
----------------------
9 West 57th Street
New York, New York 10019
(212) 413-1800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
James E. Buckman, Esq.
Vice Chairman and
General Counsel
Cendant Corporation
9 West 57th Street
New York, New York 10019
(212) 413-1800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
COPIES TO:
<TABLE>
<CAPTION>
<S> <C> <C>
VINCENT J. PISANO, ESQ. ERIC J. BOCK, ESQ. ROBERT EVANS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER SENIOR VICE PRESIDENT, LEGAL SHEARMAN & STERLING
& FLOM LLP CENDANT CORPORATION 599 LEXINGTON AVENUE
FOUR TIMES SQUARE 9 WEST 57TH STREET NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10019 (212) 848-4000
(212) 735-3000 (212) 413-1800
----------------------
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration
statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plan, please check
the following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. |_|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434 under the Securities Act, check the following box. |_|
----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Move.com Common Stock, par value $.01 per share $ 150,000,000 $ 39,600
=====================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===============================================================================
[FLAG]
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale is not
permitted.
Subject to Completion. Dated ________, 2000.
SHARES
LOGO
Move.com Common Stock
Cendant Corporation
-------------------
This is an initial public offering of shares of a new series of
common stock of Cendant Corporation called Move.com stock. We intend these
shares to reflect the performance of Move.com Group, our online relocation,
real estate and home-related services business.
Prior to this offering, there has been no public market for the
Move.com stock. It is currently estimated that the initial public offering
price per share will be between $ and $ . Cendant intends to list the
Move.com stock on the New York Stock Exchange under the symbol "MOV".
See Risk Factors on page 11 to read about factors you should
consider before buying shares of Move.com stock.
-------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------ ------------
<S> <C> <C>
Initial public offering price....................................... $ $
Underwriting discount .............................................. $ $
Proceeds, before expenses, to Move.com Group of Cendant............. $ $
</TABLE>
To the extent that the underwriters sell more than shares of
Move.com stock, the underwriters have the option to purchase up to an
additional shares from Cendant at the initial offering price less
the underwriting discount.
-------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
GOLDMAN, SACHS & CO.
-------------------
Prospectus dated , 2000.
[ARTWORK TO COME]
[GRAPHIC ILLUSTRATING WEB SITE FUNCTIONALITY]
PROSPECTUS SUMMARY
This summary highlights key aspects of the offering of Move.com
stock. This summary is not a substitute for the more detailed information
contained or incorporated by reference in this prospectus. For a more
comprehensive description of the offering of Move.com stock, you should
read the entire prospectus. As used in this prospectus, the term "Move.com
Group" does not represent a separately incorporated entity, but rather
means those businesses, assets and liabilities of Cendant that are
dedicated to providing online relocation, real estate and home-related
products and services. As used in this prospectus, the term "move.com"
refers to the move.com Web site and the term "business partners" refers to
advertisers and service providers that pay fees to Move.com Group. The term
"move.com network" refers to the following Web sites: move.com, rent.net,
century21.com, coldwellbanker.com, era.com, seniorhousing.net,
corporatehousing.net, selfstorage.net and welcomewagon.com.
Cendant Corporation is one of the foremost providers of real
estate, travel and direct marketing-related consumer and business services
in the world. From a financial reporting standpoint, we have separated our
businesses into two groups: Move.com Group, our online relocation, real
estate and home-related products and services business, and Cendant Group,
which includes the rest of our businesses and a retained interest in
Move.com Group. This prospectus only relates to the offering of Move.com
stock, which is intended to reflect the performance of Move.com Group, and
does not relate to CD stock, our other series of common stock, which is
intended to reflect the performance of Cendant Group.
MOVE.COM GROUP
Move.com Group operates a popular network of Web sites, which offer
a wide selection of quality relocation, real estate and home-related
products and services. Move.com Group seeks to improve the often stressful
and demanding moving experience by providing a one-source, "friend-in-need"
solution before, during and after the move. Move.com Group strives to
establish strong, long-term relationships with consumers by offering
quality products and services for each phase of the moving process from
finding a home to improving an existing home. Move.com Group also provides
a broad-based distribution platform for its business partners, who are
trying to reach a highly targeted and valued group of consumers at the most
opportune times. Move.com Group currently generates the following types of
revenue from its business partners: listing subscription fees, advertising
and sponsorship fees, e-commerce transaction fees and Web site management
fees.
Move.com Group builds long-term relationships with consumers by
providing them access to:
o relocation services, guides and planning tools leveraging
the expertise of Cendant Mobility Services Corporation, the
largest provider of corporate employee relocation services
in the world;
o neighborhood information, including data on schools, crime,
climate and cost of living covering all 50 states and 95% of
all zip codes in the United States;
o up-to-date listings of homes for sale across the United
States, Canada and in 32 other countries from the CENTURY
21(R), COLDWELL BANKER(R) and ERA(R) brands, three of the
five largest residential real estate franchise systems in
the world;
o listings of apartments in over 3,000 cities in all 50 states
and Canada through rent.net, the most visited real estate
rentals Web site as measured by the number of unique
visitors in December 1999, according to Media Metrix;
o listings of self storage, temporary/corporate housing and
senior housing facilities across the United States and
Canada through Self Storage Net, Corporate Housing Net and
Senior Housing Net;
o mortgages and refinancings financed by Cendant Mortgage
Corporation, the sixth-largest retail originator of
mortgage loans in the United States in 1999;
o disconnection and connection services, through National Home
Connections, LLC, which allow consumers to change their
utilities and cable providers, newspaper subscriptions,
mailing address and vehicle and voter registration;
o advertising and discounts from local merchants throughout
the United States and Canada through Welcome Wagon, Cendant
Group's premier distributor of discount offers for over
40,000 merchants; and
o home-related products and services in categories such as
home improvement, maintenance and furnishings from
quality-oriented business partners.
Move.com Group develops relationships with quality-oriented
business partners by providing them access to a highly targeted and valued
group of consumers across multiple distribution/sales channels including:
o a network of high-traffic Web sites including rent.net,
century21.com, coldwellbanker.com and era.com;
o CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real estate
agents and brokers operating through offices across the
United States and Canada;
o over one million direct mail solicitations delivered
annually by Welcome Wagon; and
o toll-free customer service center of National Home Connections.
Move.com Group's assets include move.com, the businesses of Rent
Net, Inc. and National Home Connections, LLC, as well as agreements with
Cendant Group. These agreements give Move.com Group access to home listings
from the CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real estate franchise
systems, discount offers from Welcome Wagon's local merchant customers,
mortgage products and services of Cendant Mortgage and a variety of
relocation services and information from Cendant Mobility. Although
included in the definition of the move.com network, century21.com,
coldwellbanker.com, era.com and welcomewagon.com are not owned by Move.com
Group, but rather operated and maintained by Move.com Group pursuant to
Intercompany Agreements with Cendant Group.
MOVE.COM GROUP'S STRATEGY
Move.com Group intends to achieve its objective of becoming the
leading provider of quality online relocation, real estate and home-related
products and services through the following strategic initiatives:
o develop brand awareness by aggressively marketing Move.com
Group's services through a significant online and offline
advertising campaign, as well as national and regional
promotions by Cendant Group's leading real estate franchise
systems and Welcome Wagon;
o increase product and service offerings to grow user base and
improve the consumer experience;
o develop strong relationships with consumers by providing
personalized, targeted content and services;
o expand and enhance relationships with real estate
professionals and quality-oriented business partners; and
o pursue strategic alliances and acquisitions, including
international opportunities.
MOVE.COM GROUP'S COMPETITIVE ADVANTAGES
Move.com Group has considerable advantages that distinguish it from
its online competitors by virtue of having all of the following:
o substantial existing online traffic bases of rent.net, the
most visited Web site for real estate rentals, and Cendant
Group's real estate franchise systems' Web sites;
o the expertise of Rent Net, a pioneer of online real estate
services, in building and driving consumer traffic through
distribution partnerships;
o an agreement with AltaVista Company, an operator of
new-media and commerce network on the Internet, for Move.com
Group to be an exclusive real estate content provider of the
new AltaVista Real Estate Channel;
o affiliation and intercompany relationships with Cendant
Group's leading real estate franchise systems, brands and
businesses, which provide Move.com Group with:
o content at no cost, including up-to-date listings of
homes for sale under 40-year agreements with the
CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real
estate franchise systems;
o industry-leading expertise in relocation, home
buying/selling, mortgage financing/refinancing and
local advertising from the managements of Cendant
Mobility, the CENTURY 21(R), COLDWELL BANKER(R) and
ERA(R) real estate franchise systems, Cendant
Mortgage and Welcome Wagon, respectively;
o brand exposure through Cendant Group's real estate
franchise systems' multi-million-dollar national
advertising campaigns and direct promotions by their
brokers and agents; and
o access to and resources associated with Cendant
Group's well-established business-to- business
marketing relationships with over 110 vendor
corporations; and
o state-of-the-art technology platform delivering customized
consumer experiences by interactively capturing consumers'
interests and tailoring content to their needs.
CENDANT GROUP
Cendant Group includes:
o all of the businesses in our four principal divisions: real
estate services, travel services, direct marketing-related
services and other consumer and business services, except
for the businesses that comprise Move.com Group; and
o a retained interest in Move.com Group, which is currently
100%, but which will decline to reflect any future issuances
of Move.com stock (including this offering).
See "Illustration of Terms" for examples relating to Cendant Group's
retained interest in Move.com Group.
Move.com Group's principal executive offices are located at 795
Folsom Street, San Francisco, California 94107. Move.com Group's telephone
number is (415) 796-0000. The content of the move.com network is not part
of this prospectus. Our principal executive offices are located at 9 West
57th Street, New York, New York 10019. Our telephone number is (212)
413-1800.
THE OFFERING
Move.com stock offered.................... shares
Move.com stock effectively
owned by Cendant Group through its
retained interest after this offering..... shares
Move.com stock to be outstanding after
the offering.............................. shares
Use of proceeds........................... Move.com Group intends to use
the net proceeds to provide
working capital to increase
marketing expenditures, develop
new products and expand the
move.com network, and for
general corporate purposes. In
addition, Move.com Group may
use a portion of the net
proceeds to acquire or invest
in complementary businesses,
technologies, services or
products to be contained in the
Move.com Group. See "Use of
Proceeds."
Proposed New York Stock Exchange symbol... "MOV"
Unless otherwise indicated, all information in this prospectus
assumes no underwriters' exercise of their option. The net proceeds from
any exercise of the underwriters' option will be allocated to Move.com
Group.
The shares of Move.com stock to be outstanding after the offerin
shares of Move.com stock that have been reserved for issuance under
Move.com Group's stock option plan and other outstanding options. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Move.com Group," "Move.com Group Management- Move.com Group
Stock Option Plan", "Description of Capital Stock" and "Underwriting."
-------------------
MOVE.COM STOCK
Basic investment characteristics.......... Move.com stock is a type of stock
sometimes referred to as a tracking
stock, which is a separate
series of common stock, that
represents an ownership
interest in the corporation
that issues it, but is designed
to reflect, or track, the
performance of a specified
group of the corporation's
assets or businesses instead of
the overall economic
performance of the corporation.
Move.com stock is intended to
track the economic performance
of Move.com Group by
incorporating liquidation
rights, redemption, exchange
and dividend terms, modeled
after other publicly traded
tracking stocks, that attempt
to provide economic rights in
the businesses they track that
are similar to the rights that
common stock would have if the
"tracked business" were a
separate corporation.
Although we intend Move.com
stock to reflect the
performance of Move.com Group,
Move.com stock is common stock
of Cendant and holders of
Move.com stock will be subject
to all of the risks associated
with an investment in Cendant
and all of its businesses,
assets and liabilities.
Voting rights............................. Each share of Move.com stock
will entitle the holder to one
vote. Holders of CD stock and
Move.com stock will vote
together as a single class,
except on any amendment to the
charter that would increase or
decrease the par value of the
shares of either class or alter
or change the powers,
preferences or special rights
of the shares of such class so
as to affect them adversely.
Each share will continue to
have one vote per share
following a stock split, stock
dividend or similar
reclassification.
Dividends on Move.com stock............... We currently intend to retain
all of Move.com Group's
earnings to finance its
operations, repay indebtedness
and fund future growth. We do
not expect to pay any dividends
on Move.com stock for the
foreseeable future. The terms
of the Move.com stock prohibit
the payment of dividends on
Move.com stock in excess of the
amounts which would ordinarily
be available for dividends if
Move.com Group were a separate
corporation.
Your rights if we sell all
or substantially all of the
assets of Move.com Group................. If we dispose of all or
substantially all of the assets
of Move.com Group and the
disposition is not an exempt
disposition (as defined below),
we would be required to choose
one of the following three
alternatives:
o pay a dividend to holders
of Move.com stock in an
amount equal to the
proportionate interest of
the holders of Move.com
stock in the net proceeds
of the disposition;
o redeem from holders of
Move.com stock all
outstanding shares of
Move.com stock in an amount
equal to the proportionate
interest of the holders of
Move.com stock in the net
proceeds of such
disposition; or
o in exchange for outstanding
Move.com stock, issue CD
stock (or, if we create
additional series of common
stock in the future
designed to track any of
our other businesses,
shares of any such series)
at a 10% premium to the
market value of the
Move.com stock being
exchanged.
An exempt disposition
means any of the following:
o a disposition in connection
with the liquidation,
dissolution or winding-up
of Cendant and the
distribution of assets to
stockholders,
o a disposition to any person
or entity controlled by
Cendant, as determined by
the board of directors of
Cendant in its sole
discretion,
o a disposition by either
Move.com Group or Cendant
Group, for which Cendant
receives consideration
primarily consisting of
equity securities of an
entity which is primarily
engaged or proposes to
engage primarily in one or
more businesses similar or
complementary to businesses
conducted by such Group
prior to the disposition,
as determined by the board
of directors of Cendant in
its sole discretion,
o a dividend, out of Move.com
Group's assets, to holders
of Move.com stock and a
transfer of a corresponding
amount of Move.com Group's
assets to Cendant Group in
respect of its retained
interest in Move.com Group,
o a dividend, out of Cendant
Group's assets, to holders
of CD stock and
o any other disposition, if
(1) at the time of the
disposition there is only
one class of common stock
outstanding, or (2) before
the 30th trading day
following the disposition
we have mailed a notice
stating that we are
exercising our right to
exchange all of the
outstanding shares of CD
stock or Move.com stock for
newly issued shares of the
other series of common
stock as contemplated under
"Exchange of CD stock or
Move.com stock at Cendant's
option."
At any time within one year
after completing a special
dividend or partial redemption
referred to above, we will have
the right to issue CD stock in
exchange for the remaining
outstanding Move.com stock at a
10% premium to the value of the
Move.com stock being exchanged
(based upon average market
values over a specified 20
trading day period before the
exchange). Under existing
federal law, any such exchange
would not be a taxable event
for holders of Move.com stock.
Exchange of CD stock or Move.com
stock at Cendant's option................. On and after the 18-month
anniversary of this offering of
Move.com stock, we will have
the right to issue CD stock in
exchange for outstanding
Move.com stock at a premium.
The premium will initially be
20% and will decline ratably
each month over the following
18 months to 15%.
From and after the third
anniversary of this offering of
Move.com stock, we will have
the right, if outstanding
Move.com stock exceeds 40% but
does not exceed 60% of total
market capitalization of the
two classes of Cendant common
stock, to issue either series
of common stock in exchange for
the other without a premium. In
the event that Move.com stock
exceeds 60% of total market
capitalization, we will lose
the right to effect an exchange
without a premium during such
period.
Notwithstanding the exchange
provisions outlined above, if
we receive an opinion of tax
counsel to the effect that as a
result of changes in tax law it
is more likely than not that
either (1) we, our subsidiaries
or affiliates, successors or
stockholders are, or will be,
subject to tax upon the
issuance of either of the CD
stock or the Move.com stock or
(2) either the CD stock or the
Move.com stock is not, or will
not be, treated solely as our
stock, we will have the right
to issue shares of CD stock in
exchange for outstanding shares
of Move.com stock at a 10%
premium, regardless of when
such adverse tax law changes
take place.
For purposes of determining the
exchange ratio, we will value
CD stock and Move.com stock
based on their average market
values over the 20 consecutive
trading day period ending on,
and including, the fifth
trading day immediately
preceding the date on which we
mail the notice of exchange to
holders of the outstanding
shares being exchanged.
Our right to issue shares of
common stock of a subsidiary of
Cendant in exchange for shares
of Move.com stock........................ We will have the right, at any
time, to issue shares of stock
of a subsidiary of Cendant in
exchange for Move.com stock if
all of the assets and
liabilities of Move.com Group
are held by or transferred to
that subsidiary. If we exercise
this right, holders of Move.com
stock would have the legal
rights of owners of the
subsidiary and would cease to
be stockholders of Cendant.
Liquidation............................... Upon liquidation of Cendant,
holders of CD stock and
Move.com stock will be entitled
to receive the net assets of
Cendant, if any, remaining for
distribution to stockholders
after payment or provision for
all liabilities of Cendant and
payment of the liquidation
preference payable to any
holders of preferred stock.
Amounts due upon liquidation in
respect of shares of CD stock
and Move.com stock will be
distributed pro rata in
accordance with the average
market values of CD stock and
Move.com stock over a specified
20 trading day period prior to
the liquidation.
SUMMARY FINANCIAL AND OTHER DATA
In order to prepare separate financial statements for Move.com
Group, Cendant Corporation has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between Cendant Group and
Move.com Group. Thus, the financial statements for Cendant will include
separate financial data for Move.com Group. Cendant will provide separate
financial statements and management's discussion and analysis for Move.com
Group. The actual assets and liabilities of Cendant will not be transferred
and the interests of Cendant's creditors will not be affected.
Cendant allocates a portion of the cost of various corporate,
general and administrative services and shared services to the Move.com
Group generally based on utilization. Where determination based on
utilization is impracticable, overhead typically is allocated on a
percentage of revenue basis. A portion of the income tax expense, which is
determined on a consolidated basis, is allocated to Move.com Group, and has
been recorded as a tax benefit in Move.com Group's financial statements in
accordance with Cendant's tax allocation policy. For a more complete
description of how we will allocate cash between Cendant Group and Move.com
Group, see "Cash Management and Allocation Policies."
MOVE.COM GROUP
The following table presents summary historical combined data for
Move.com Group as of and for the years ended December 31, 1999, 1998 and
1997 and as of and for the period from February 8, 1996 (the Rent Net
acquisition date) through December 31, 1996. This information was derived
from the combined financial statements of Move.com Group and should be read
in conjunction with the consolidated financial statements of Cendant which
are incorporated by reference in this prospectus. After the issuance of
Move.com stock, Cendant will report earnings per share data for Cendant
Group and Move.com Group.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 8, 1996
THE RENT NET
AS OF OR FOR THE ACQUISITION DATE)
YEAR ENDED DECEMBER 31, THROUGH
---------------------------- DECEMBER 31,
1999 1998 1997 1996
---------- ------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue $ 17,647 $ 9,674 $ 5,670 $ 1,081
Cost of revenue 3,149 1,664 1,091 632
---------- ------- ------- ------------
Gross profit 14,498 8,010 4,579 449
OPERATING EXPENSES:
Product development 3,940 193 - 14
Selling and marketing 16,020 5,484 3,906 2,335
General and administrative 16,751 1,922 1,227 604
Depreciation and amortization 2,217 1,826 934 604
---------- ------- ------- ------------
Loss before income tax benefit (24,430) (1,415) (1,488) (3,108)
Income tax benefit 9,976 572 603 1,266
Net loss $ (14,454)$ (843)$ (885) $ (1,842)
========== ======= ======= ============
Pro forma basic and diluted earnings
per share of Move.com stock(1)
Pro forma basic and diluted weighted average
shares of Move.com stock(1)
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,009 $ - $ - $ -
Total assets 22,000 8,614 7,417 3,559
Total liabilities 20,975 4,379 2,181 878
Group equity 1,025 4,235 5,236 2,681
OTHER DATA:
Net cash provided by (used in) operating
activities $ (4,435)$ 1,279 $ 428 $ (1,215)
Net cash used in investing activities (5,070) (1,121) (3,868) (242)
Net cash provided by (used in) financing activities 10,514 (158) 3,440 1,457
Capital expenditures (2,482) (881) (662) (242)
</TABLE>
- ---------------------------
(1)Share amounts include shares effectively owned by Cendant through its
retained interest in Move.com Group. Pro forma basic and diluted
earnings per common share amounts have been calculated by dividing net
income applicable to common shares by the pro forma weighted average
common shares outstanding.
RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the risk factors described below, and the other information in
this prospectus and the information in the documents incorporated by
reference, before deciding to invest in Move.com stock. The risks described
below are not the only risks facing Move.com Group. Additional risks not
presently known to Move.com Group or that it currently deems immaterial may
also impair its business operations. Move.com Group's business, financial
condition or results of operations could be materially adversely affected
by any of these risks. The trading price of Move.com stock could decline
due to any of these risks, and you may lose all or part of your investment.
RISKS RELATING TO MOVE.COM STOCK
HOLDERS OF MOVE.COM STOCK WILL NOT HAVE ANY LEGAL RIGHTS RELATING TO
SPECIFIC ASSETS OF CENDANT.
We cannot assure you that the market value of Move.com stock will
reflect the performance of Move.com Group as we intend. Even though we have
allocated, for financial reporting purposes, all of our consolidated
assets, liabilities, revenue, expenses and cash flow between Move.com Group
and Cendant Group in order to prepare the financial statements of Move.com
Group, that allocation will not change the legal title to any assets or
responsibility for any liabilities and will not affect the rights of any of
our creditors. Holders of CD stock and Move.com stock will not have any
legal rights related to specific assets of either Group, and, in any
liquidation, will receive a share of the net assets of Cendant based on the
relative trading prices of CD stock and Move.com stock rather than on any
assessment of the actual value of Cendant Group or Move.com Group. Holders
of CD stock and Move.com stock will be common stockholders of Cendant and,
as such, will be subject to all of the risks associated with an investment
in Cendant and all of its businesses, assets and liabilities, including the
pending class action litigation.
THE VALUE OF MOVE.COM STOCK MAY DECREASE FOR REASONS UNRELATED TO PROSPECTS
FOR MOVE.COM GROUP.
Financial results of Cendant Group's businesses will affect
Cendant's consolidated results of operations, financial position and
borrowing costs. This could affect the results of operations, financial
position or borrowing costs of Move.com Group or the market price of
Move.com stock. Since the CD stock and Move.com stock are series of common
stock of Cendant, investors may attribute negative results for Cendant
Group's businesses to Move.com Group and the price of the Move.com stock
may decline if there are negative perceptions relating to Cendant Group's
businesses.
In addition, net losses of Cendant Group's businesses, and any
dividends or distributions on, or repurchases of, CD stock or any preferred
stock, may reduce the assets of Cendant legally available for dividends on
Move.com stock. For these reasons, you should read the financial
information for Move.com Group included elsewhere in this prospectus
together with financial information for Cendant incorporated by reference
into this prospectus.
HAVING TWO SERIES OF COMMON STOCK COULD CREATE POTENTIAL CONFLICTS OF
INTEREST AND COULD RESULT IN THE BOARD OF DIRECTORS OF CENDANT MAKING
DECISIONS THAT ADVERSELY AFFECT HOLDERS OF MOVE.COM STOCK.
Having two series of common stock could give rise to occasions when
the interests of holders of one series might diverge or appear to diverge
from the interests of holders of the other series. In addition, due to the
extensive relationships between Cendant Group and Move.com Group, there
will likely be inherent conflicts of interest between the two Groups.
Cendant Group entities have entered into various Intercompany Agreements
with Move.com Group entities which can lead to conflicts between the Groups
relating to the services and products rendered. Officers and directors of
Cendant owe fiduciary duties to both classes of stockholders. However, the
fiduciary duties owed by such officers and directors are to Cendant as a
whole, and decisions deemed to be in the best interest of Cendant as a
whole may not be in the best interest of Move.com Group when considered on
its own. Examples include:
o decisions as to whether to allocate the proceeds of
issuances (or the costs of repurchases) of Move.com stock to
Cendant Group in respect of its retained interest in
Move.com Group or to the equity of Move.com Group -- which
decisions would affect the amount of funds available to each
Group to fund its operational and cash requirements and the
cost of such funds;
o decisions as to how to allocate consideration received in
connection with a merger involving Cendant between holders
of CD stock and Move.com stock -- which decisions could be
favorable or unfavorable to stockholders of either class
depending on how such proceeds are allocated;
o decisions as to whether and when to issue CD stock in
exchange for Move.com stock or Move.com stock in exchange
for CD stock -- which decisions could be favorable or
unfavorable to stockholders of either class depending on
their investment strategy and whether or not such issuance
requires the payment of a premium;
o decisions as to whether and when to approve dispositions of
assets of either Group -- which decisions could be favorable
or unfavorable to the stockholders of either class depending
on the amount and type of the consideration received in such
disposition, the holder's investment strategy and the board
of directors' determination to either pay a dividend or
redeem his or her shares or to issue shares of the other
class in exchange therefor;
o decisions as to how to allocate available cash between
Cendant Group and Move.com Group and decisions as to whether
and how to make transfers of funds from one Group to another
-- which decisions would affect the amount of funds
available to each Group to fund its operational and cash
requirements and the cost of such funds;
o decisions as to whether to pay or omit the payment of dividends
on CD stock or Move.com stock; and
o decisions as to whether and to what extent the two Groups
compete with each other and how corporate opportunities are
allocated between the two Groups -- which decisions could be
favorable or unfavorable to the stockholders of either class
depending on the effect of such competition on the relevant
Group and how the corporate opportunities are allocated.
If Cendant directors own disproportionate interests (in percentage
or value terms) in CD stock and Move.com stock, that disparity could create
or appear to create potential conflicts of interest when they are faced
with decisions that could have different implications for the stockholders
of either Group.
Except as set forth under "Description of Capital
Stock--Determinations by the Board of Directors " and "Cash Management and
Allocation Policies," no formal policies have been established to resolve
conflicts of interest between the Groups or to determine which issues are
presented to the special committee created to resolve conflicts between the
Groups. The members of the board of directors or of the special committee
will make all determinations in good faith and in the best interest of
Cendant as a whole.
PRINCIPLES OF DELAWARE LAW MAY PROTECT DECISIONS OF THE BOARD OF DIRECTORS
THAT HAVE A DISPARATE IMPACT UPON HOLDERS OF CD STOCK AND MOVE.COM STOCK.
Delaware law provides that a board of directors owes an equal duty
to all stockholders regardless of class or series and does not have
separate or additional duties to the holders of any particular class or
series of stock. Recent cases in Delaware involving tracking stocks have
established that decisions by directors or officers involving differing
treatment of tracking stocks may be judged under the "business judgment
rule." Under these principles of Delaware law and the "business judgment
rule," you may not be able to challenge board of directors' decisions that
have a disparate impact upon holders of Move.com stock if the board of
directors is adequately informed with respect to such decisions and acts in
good faith and in the honest belief that it is acting in the best interests
of all of Cendant's stockholders and members of the board of directors do
not have any personal conflicts of interest. If, for example, the board of
directors were to make a decision that it in good faith believed to be in
the best interest of Cendant as a whole, and such decision were to have a
positive impact on CD stock and negative impact on Move.com stock, holders
of Move.com stock may not be able to challenge the board of directors'
decision.
AT TIMES, WE HAVE THE OPTION TO ISSUE CD STOCK IN EXCHANGE FOR MOVE.COM
STOCK AND THIS MAY BE DISADVANTAGEOUS TO HOLDERS OF MOVE.COM STOCK.
At times, we have the right to issue CD stock in exchange for
Move.com stock. Because some exchanges would be at a premium to the market
value of the shares being exchanged, and since we could determine to effect
an exchange at a time when either or both of CD stock and Move.com stock
may be considered to be overvalued or undervalued, any such exchange may be
disadvantageous to holders of Move.com stock. In addition, such exchange
would preclude holders of Move.com stock from retaining their investment in
a security that is intended to reflect separately the performance of
Move.com Group. The right of Cendant to issue CD stock in exchange for
Move.com stock could adversely affect the trading price of one or both
series of stock because it could reduce the attractiveness of the security
to investors following an exchange and could limit the premium potentially
available to investors without an exchange option being incorporated into
the terms of the security.
For example, if we issue Move.com stock in exchange for all of the
outstanding shares of CD stock, Cendant only would have one class of common
stock outstanding. If Cendant had the right to make this exchange during a
period when Cendant was required to pay the holders of CD stock a premium
for their stock, then the exchange would dilute the economic interests of
holders of Move.com stock from a financial perspective by diluting earnings
per share.
WE MAY DISPOSE OF ASSETS OF EITHER MOVE.COM GROUP OR CENDANT GROUP WITHOUT
YOUR APPROVAL.
Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of Cendant. As long
as the assets attributed to a Group represent less than substantially all
of Cendant's assets, we may approve sales and other dispositions of any
amount of the assets of that Group without any stockholder approval. If we
dispose of all or substantially all of the assets of Move.com Group, we
would be required, if the disposition is not an exempt disposition under
the terms of our charter, to choose one of the following three
alternatives:
o declare and pay a dividend in an amount equal to the
proportionate interest of the holders of Move.com stock in the
net proceeds of such disposition;
o redeem Move.com stock for an amount equal to the proportionate
interest of holders of Move.com stock in the net proceeds of
such disposition; or
o issue shares of CD stock in exchange for Move.com stock at a 10%
premium.
Consequently, holders of Move.com stock may receive less value for their
shares than the value that a third-party buyer might pay for all or
substantially all of the assets of Move.com Group. In addition, we can not
assure you that the net proceeds per share of the Move.com stock will be
equal to or more than the market value per share of such common stock prior
to or after announcement of a disposition. The Cendant board of directors
will decide, in its sole discretion, how to proceed and is not required to
select the option that would result in the highest value to holders of
Move.com stock, if such option would not be in the best interests of
Cendant's stockholders as a whole.
THE CENDANT BOARD OF DIRECTORS HAS SOLE DISCRETION TO CHANGE CASH
MANAGEMENT AND ALLOCATION POLICIES AND THIS MAKES IT RISKIER TO BE A HOLDER
OF MOVE.COM STOCK THAN A HOLDER OF ORDINARY COMMON STOCK.
The Cendant board of directors has adopted policies relating to
cash management and allocations between Cendant Group and Move.com Group.
The board of directors in its sole discretion may modify or rescind our
policies with respect to the allocation of corporate overhead, taxes, debt,
interest and other matters, or may adopt additional policies, in its sole
discretion without stockholder approval. The board of directors' discretion
to change these policies without stockholder approval makes it riskier to
be a holder of Move.com stock than a holder of ordinary common stock. A
board of directors decision to modify or rescind these policies, or adopt
additional policies could have different effects on holders of Move.com
stock and CD stock or could result in a benefit or detriment to one class
of stockholders compared to the other class. The board of directors of
Cendant will make any such decision in accordance with its good faith
business judgment, so that the decision is in the best interests of Cendant
and all of its stockholders as a whole. There may be certain circumstances
in which a decision can be made only in a fashion that will have a
disproportionate impact on the holders of one class compared to the holders
of the other class. In such situations, the interests of Cendant's
stockholders as a whole will not be consistent and the board may turn to
the special committee or retain outside advisors with respect to the
interests of one or both of the classes. Although it is not possible to
indicate all factors or even specific factors that may influence the
board's decision, the board will consider all relevant factors under the
circumstances including the fairness to all stockholders taken as a whole.
For a more comprehensive description of these policies, see "Cash
Management and Allocation Policies."
HOLDERS OF CD STOCK AND MOVE.COM STOCK WILL GENERALLY VOTE TOGETHER AS A
SINGLE CLASS AND WILL HAVE LIMITED SEPARATE VOTING RIGHTS.
Holders of CD stock and Move.com stock will vote together as a
single class, except if any amendment to the charter would increase or
decrease the par value of the shares of either class or alter or change the
powers, preferences or special rights of the shares of such class so as to
affect them adversely. When holders of CD stock and Move.com stock vote
together as a single class, holders of the series of common stock having a
majority of the votes will be in a position to control the outcome of the
vote even if the matter involves a conflict of interest between holders of
CD stock and holders of Move.com stock. We expect that, for the foreseeable
future, the holders of CD stock will have a substantial majority of the
voting power of Cendant because the aggregate number of outstanding shares
of CD stock will be substantially greater than the aggregate number of
outstanding shares of Move.com stock.
AGREEMENTS BETWEEN MOVE.COM GROUP ENTITIES AND CENDANT GROUP ENTITIES WILL
NOT BE THE RESULT OF THIRD-PARTY NEGOTIATIONS.
Because Cendant Group and Move.com Group are both engaged in real
estate businesses, Move.com Group and Cendant Group will to some extent be
competing with each other when offering their products and services to
potential consumers.
Move.com Operations, Inc., a wholly-owned subsidiary of Cendant and
part of the Move.com Group, on behalf of Move.com Group, has entered into a
number of intercompany arrangements with Cendant Group entities. These
Intercompany Agreements and any future agreements between Move.com Group
and Cendant Group entities did not result, or will not necessarily result
from, arm's-length negotiations. As a result, such agreements may be less
favorable to Move.com Group than those that it could have obtained from
unaffiliated third parties. Moreover, many of the transactions between
Move.com Group and Cendant Group are of an informal nature and do not lend
themselves to formulaic allocations of costs and benefits. Thus, there
inevitably will be some discretion left to the parties, who are subject to
the potentially conflicting interests described in this prospectus.
In addition, Move.com Group will be precluded from engaging in
certain activities in order to avoid competition with Cendant Group
subsidiaries and all Intercompany Agreements will be subject to amendment
by mutual agreement of the parties. To the extent that Move.com Group
derives benefits from its close relationship with Cendant, those benefits
could be reduced or eliminated in the future. Cendant is not obligated to
engage in any future business transactions or jointly pursue opportunities,
except for those expressly provided for in the Intercompany Agreements.
MOVE.COM GROUP IS DEPENDENT ON CENDANT GROUP FOR CERTAIN SERVICES.
Prior to the offering, Move.com Group has been dependent upon
Cendant Group for various real estate, financial, tax, human resource,
legal and other functions that typically are performed by in-house
personnel of public companies. Following the offering and indefinitely
thereafter, Move.com Group will have to continue to rely on Cendant Group
for these services, which are to be made available pursuant to Intercompany
Agreements. See "Certain Transactions." Except as expressly required by the
terms of the Intercompany Agreements, Cendant Group could choose not to
provide these services or to take actions which, could result in increased
allocations of costs for these services to Move.com Group.
INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER
DILUTION.
The initial public offering price of the Move.com stock will be
substantially higher than the pro forma net tangible book value per share
of Move.com stock immediately after the offering and will be substantially
higher than the pro forma net tangible book value per share of both classes
of Cendant common stock immediately after the offering. If you purchase
Move.com stock in this offering, you will incur immediate and substantial
dilution in the pro forma net tangible book value per share from the price
you pay. Certain employees of Cendant and its subsidiaries and Chatham
Street Holdings LLC also have outstanding stock options and warrants to
purchase Move.com stock with exercise prices significantly below the
initial public offering price of the Move.com stock. To the extent these
options are exercised, there will be further dilution.
THE VALUE OF MOVE.COM STOCK MAY DECLINE DUE TO FUTURE ISSUANCES OF MOVE.COM
STOCK.
Our charter allows the board of directors, in its sole discretion,
to issue authorized but unissued shares of either class of common stock.
This could dilute the value of shares of Move.com stock. The board of
directors of Cendant may issue CD stock or Move.com stock to, among other
things:
o raise capital;
o provide compensation or benefits to employees;
o pay stock dividends; or
o acquire companies or businesses.
Under Delaware general corporation law, the board of directors of
Cendant would not need your approval for these issuances. We do not intend
to seek your approval for any such issuances unless stock exchange
regulations or other applicable law require approval or the board of
directors of Cendant deems it advisable.
We cannot predict the effect, if any, that sales of Move.com stock,
or the availability of such shares for sale, will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of
Move.com stock in the public market, or the perception that such sales may
occur, could adversely affect prevailing market prices.
WE ARE NOT REQUIRED TO PAY DIVIDENDS EQUALLY ON CD STOCK AND MOVE.COM
STOCK.
Although we do not intend to pay cash dividends in the foreseeable
future, the Cendant board of directors could elect to pay dividends on CD
stock or Move.com stock, or both, in equal or unequal amounts. Such a
decision would not necessarily have to reflect:
o the financial performance of either Cendant Group or Move.com Group;
o the amount of assets available for dividends on either series; or
o the amount of prior dividends declared on either series.
STOCKHOLDERS WILL NOT VOTE ON HOW TO ALLOCATE CONSIDERATION RECEIVED IN
CONNECTION WITH A MERGER AMONG HOLDERS OF CD STOCK AND HOLDERS OF MOVE.COM
STOCK.
Our charter will not contain any provisions governing how
consideration received in connection with a merger or consolidation
involving Cendant is to be allocated between holders of CD stock and
holders of Move.com stock. Neither holders of CD stock nor holders of
Move.com stock will have a separate class vote in any merger or
consolidation so long as we divide the type and amount of consideration
between holders of CD stock and holders of Move.com stock in a manner which
the board of directors determines, in good faith, to be fair. In any such
merger or consolidation, the different ways we may divide the consideration
may have materially different results. Merger consideration received by
Cendant's stockholders (which could include cash, stock or other
securities) may be divided between stockholders of CD stock and Move.com
stock in a manner that does not provide the same dollar amount or
percentage premium to each class of stockholders or in a manner that
provides different forms of consideration (cash, stock or other securities)
to different classes of stockholders. As a result, the consideration to be
received by holders of Move.com stock in any such merger or consolidation
may be materially less valuable than the consideration they would have
received if that business had been sold separately or if they had a
separate class vote on such merger or consolidation.
HAVING TWO SERIES OF COMMON STOCK MAY INHIBIT OR PREVENT ACQUISITION BIDS
FOR CENDANT, CENDANT GROUP OR MOVE.COM GROUP.
If Cendant Group and Move.com Group were separate companies, any
person interested in acquiring either Cendant Group or Move.com Group
without negotiating with management could seek control of that entity by
obtaining control of its outstanding voting stock by means of a tender
offer or proxy contest. Although we intend CD stock and Move.com stock to
reflect the separate performances of Cendant Group and Move.com Group,
respectively, a person interested in acquiring Move.com Group without
negotiation with Cendant's management could obtain control of Move.com
Group only by obtaining control of the outstanding voting stock of Cendant.
In addition, since Cendant believes the issuance of Move.com stock could
lead to an increase in its market value, the cost of obtaining control by a
third party would be greater and the acquirer would be required to deal
with holders of two separate classes of stock who might have entirely
different investment objectives.
The existence of two series of common stock could present
complexities to an acquiring person which could prevent stockholders from
profiting from an increase in the market value of their shares as a result
of a change in control of Cendant by delaying or preventing such a change
in control.
In addition, the following provisions of our amended and restated
certificate of incorporation, by-laws and Delaware law may inhibit changes
of control not approved by the board of directors:
o the board of directors may issue shares of preferred stock
without further stockholder approval;
o stockholders may not take action by written consent and special
meetings of stockholders may be called only by the Chairman of
the board of directors, the President or the board of directors
pursuant to a resolution;
o our by-laws require advance notice for stockholder nominations
and proposals of new business, and this provision of the by-laws
may only be amended by an affirmative vote of at least 80% of
the stock entitled to vote;
o our amended and restated certificate of incorporation includes a
"fair price provision"; and
o we are subject to the business combination provisions of Section
203 of the Delaware general corporation law.
For a more detailed explanation of these anti-takeover constraints,
see "Description of Capital Stock--Certain Other Provisions of the Amended
and Restated Certificate of Incorporation, By-laws and Delaware Law."
WE CANNOT ASSURE YOU THAT A MARKET WILL DEVELOP FOR MOVE.COM STOCK OR WHAT
ITS MARKET PRICE WILL BE.
There is currently no public trading market for Move.com stock, and
we cannot assure you that one will develop or be sustained after the
offering. We cannot predict the extent to which investor interest in
Move.com Group will lead to the development of a trading market in Move.com
stock or how liquid that market might become. We cannot predict the prices
at which Move.com stock will trade after the offering. The initial public
offering price for Move.com stock will be determined through negotiations
with the underwriters and may not bear any relationship to the market price
at which Move.com stock will trade after the offering or to any other
established criteria for value.
The stock market has experienced significant price and volume
fluctuations. The market prices of securities of technology companies,
particularly Internet-related companies, have experienced high volatility
that often is unrelated or disproportionate to the operating performance of
those companies. These broad market fluctuations could adversely affect the
market price of the Move.com stock, and investors may not be able to resell
their shares at or above the initial public offering price.
Some of the terms of CD stock and Move.com stock may adversely
affect the trading price of Move.com stock. These terms include, among
others:
o the right of Cendant's board of directors to exchange shares of
one series of common stock for shares of the other series; and
o the discretion of Cendant's board of directors in making
determinations relating to a variety of cash management and
allocation matters.
The market price of the Move.com stock will be determined in the
trading markets. Many factors could affect the market price of the Move.com
stock.
THE ADOPTION OF A RECENT CLINTON ADMINISTRATION TAX PROPOSAL COULD RESULT
IN AN OPTIONAL EXCHANGE OF MOVE.COM STOCK FOR CD STOCK.
We may exercise our right to issue CD stock in exchange for
Move.com stock at a premium of 10% if, as a result of the enactment of
legislative changes or administrative proposals or changes, we or our
stockholders will, more likely than not, be subject to tax upon issuance of
the CD stock or Move.com stock or such stock will not be treated for U.S.
federal income tax purposes as stock of Cendant. A recent proposal by the
Clinton Administration could result in treatment of the Move.com stock as
other than our stock. As proposed by the Clinton Administration, this
provision would be effective upon the date of its enactment by Congress.
Although we expect the offering to be consummated prior to the effective
date of the proposed legislation, it is possible that further issuances of
the Move.com stock could be affected by the enactment of these proposals.
Under such circumstances, Cendant might decide to exercise its right to
redeem all of the outstanding shares of Move.com stock for CD stock at a
premium, in order to eliminate any tracking stock from its capital
structure. We cannot predict whether the proposal will be enacted by
Congress and, if enacted, whether it will be in the form proposed by the
Clinton Administration. See "Description of Capital Stock--Optional
Exchange of One Series of Common Stock for the Other Series".
RISKS RELATING TO MOVE.COM GROUP'S BUSINESS
MOVE.COM GROUP'S LIMITED OPERATING HISTORY MAKES EVALUATING ITS BUSINESS
DIFFICULT.
Rent Net began operations in 1996, Move.com Group as a whole
commenced its operations in July 1999 and launched move.com in January
2000. Accordingly, Move.com Group has only a limited operating history upon
which you can evaluate its business and prospects. An investor in Move.com
stock must consider the risks, expenses and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets,
including Web-based housing and online real estate information companies.
To address these risks and uncertainties, Move.com Group must, among other
things:
o attract business partners and consumers to the Move.com Group
business, an unproven online business;
o create, maintain and enhance awareness and loyalty for the
move.com brand, and expand the product and service offerings on
the move.com network;
o attract, integrate, retain and motivate qualified personnel; and
o adapt to meet changes in the competitive online real estate market.
Move.com Group may not be successful in accomplishing these
objectives. In addition, Move.com Group has never operated during a
downturn in the real estate market and we cannot assure you that Move.com
Group will be successful in such a market. For more information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Move.com Group."
MOVE.COM GROUP HAS A HISTORY OF LOSSES AND WE ANTICIPATE LOSSES WILL
CONTINUE.
As of December 31, 1999, Move.com Group had an accumulated deficit
of $18.0 million before funding from Cendant. Move.com Group incurred net
losses of approximately $14.5 million for the year ended December 31, 1999.
Move.com Group has not achieved profitability and expects to continue to
incur net losses in 2000 and subsequent fiscal periods. Move.com Group
expects to continue to incur significant research and development, general,
administrative and marketing expenses. As a result, Move.com Group must
generate significant revenue to achieve profitability, which may not occur.
Even if Move.com Group does achieve profitability, Move.com Group may be
unable to sustain or increase profitability on a quarterly or annual basis
in the future. For more information see "Selected Historical Combined
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Move.com Group."
THE MARKET FOR WEB-BASED ADVERTISING PRODUCTS AND SERVICES RELATING TO
RELOCATION OR REAL ESTATE IS INTENSELY COMPETITIVE.
Move.com Group's main existing and potential competitors for
consumers and advertisers include:
o Web sites offering home or apartment listings together with
other related services, such as apartments.com, cyberhomes.com,
homehunter.com, homestore.com, homeseekers.com, homeadvisor.com,
iown.com, newhomenetwork.com and realestate.com;
o online services or Web sites targeting buyers and sellers of
real estate properties and financial services companies,
offering real estate-related products and services;
o general purpose consumer Web sites, search engine providers, and
Web sites maintained by Internet service providers that offer
relocation, real estate or home-related content;
o traditional forms of media such as radio, television, newspapers
and magazines; and
o offline relocation, real estate and home-related product and
service companies.
We believe Move.com Group's content and services compete favorably
with Move.com Group's competitors. However, many of Move.com Group's
existing competitors, as well as a number of potential new competitors,
have longer operating histories or the Internet market, greater name
recognition, larger consumer bases, greater user traffic and significantly
greater financial, technical and marketing resources. Move.com Group's
competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies, make more attractive offers to
potential employees, distribution partners and content providers and
respond more quickly to new or emerging technologies and changes in
Internet user requirements. Move.com Group's competitors may develop
content that is equal or superior to or that achieves greater market
acceptance than that of Move.com Group. The barriers to entry to Web-based
services and businesses are low, making it possible for new competitors to
emerge and rapidly acquire significant market share.
Move.com Group may not be able to compete successfully for
consumers, clients and advertisers and increased competition could result
in price reductions, reduced margins or loss of market share, any of which
could materially adversely affect Move.com Group's business, results of
operations and financial condition.
MOVE.COM GROUP'S BUSINESS IS AFFECTED BY CYCLICAL ECONOMIC CONDITIONS AND
THESE FACTORS ARE BEYOND MOVE.COM GROUP'S CONTROL.
The residential real estate industry traditionally has been subject
to cyclical economic swings which could materially adversely affect
Move.com Group's business. Move.com Group's business is dependent on the
residential real estate industry and related industries which supply goods
or services to, or invest in, the residential real estate industry. The
success of Move.com Group's operations depends, to a significant extent,
upon a number of factors relating to discretionary consumer and business
spending, and the overall economy, as well as regional and local economic
conditions in markets where Move.com Group operates, including:
o perceived and actual economic conditions;
o interest rates;
o taxation policies;
o availability of credit;
o employment levels; and
o wage and salary levels.
In addition, because a consumer's purchase of real property and
related products and services is a significant investment and is relatively
discretionary, any reduction in disposable income in general may affect
Move.com Group more significantly than companies in other industries.
Move.com Group may experience seasonality in its business. The
residential real estate industry experiences a decrease in activity during
the winter. However, because of Move.com Group's limited operating history
under its current business model, we do not know if or when any seasonal
pattern will develop or the size or nature of any seasonal pattern in
Move.com Group's business. Move.com Group's limited operating history and
rapid growth make it difficult for us to assess the impact of seasonal
factors on its business. Nevertheless, we expect Move.com Group's revenue
to be subject to seasonal fluctuations, reflecting a combination of
seasonality trends for the products and services offered by Move.com Group
and seasonality patterns affecting Internet use. For example, home sales
typically peak during the spring and fall seasons and decline in the summer
and winter. The rental market typically peaks during the summer and
declines in the winter. We further believe that advertising sales in
traditional media, such as television and radio, generally are lower in the
first and third calendar quarters of each year. Internet usage may also
decline during the summer months.
Operating results may also fluctuate due to a decline in
residential home buying that decreases the demand for purchase mortgage
loans or an increase in interest rates that decreases the demand for
refinancing existing mortgage loans. Similar seasonal or other patterns may
develop and affect Move.com Group's revenue. For more information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Move.com Group."
MOVE.COM GROUP'S BUSINESS HAS RISKS ASSOCIATED WITH CHANGING LEGISLATION IN
THE REAL ESTATE INDUSTRY.
Real estate is a heavily regulated industry in the United States,
including regulation under the Fair Housing Act, the Real Estate Settlement
Procedures Act and state advertising laws. In addition, states could enact
legislation or regulatory policies in the future which could require
Move.com Group to expend significant resources to comply. As the real
estate industry evolves in the Internet environment, legislators,
regulators and industry participants may advocate additional legislative or
regulatory initiatives. Should existing laws or regulations be amended or
new laws or regulations be adopted, Move.com Group may need to comply with
additional legal requirements and incur resulting costs, or it may be
precluded from certain activities. To date, we have not spent significant
resources on lobbying or related government issues. Any need to
significantly increase our lobbying or related activities in connection
with Move.com Group's business could substantially increase Move.com
Group's operating costs.
MOVE.COM GROUP'S COMPETITIVE POSITION DEPENDS ON ITS ABILITY TO ATTRACT AND
RETAIN KEY PERSONNEL.
Move.com Group's failure to attract and retain qualified personnel
could diminish its competitive position. Move.com Group's performance is
substantially dependent on the continued services and performance of its
senior executive officers and other key personnel. In addition, Move.com
Group recently hired its new chief executive officer, chief financial
officer and chief technology officer. These individuals will have to be
integrated into our management team successfully. Except for Phil Marcus
and Jed Katz, Move.com Group does not have long-term employment agreements
with any of its key personnel and maintains no "key person" life insurance
policies. In addition, employees may leave us and work for our competitors
or start their own competing business. Move.com's future success also
depends on its ability to identify, attract, retain and motivate highly
skilled technical, sales, marketing and managerial personnel. Competition
for such persons is intense. We cannot assure you that Move.com Group will
be able to attract or retain such personnel.
FAILURE TO RETAIN AND INTEGRATE OUR ADVERTISING SALES FORCE COULD RESULT IN
LOWER ADVERTISING REVENUE.
Move.com Group depends on its internal advertising sales department
to maintain and increase Move.com Group's advertising sales. As of December
31, 1999, Move.com Group's advertising sales department consisted of 60
employees. The success of Move.com Group's advertising sales department is
subject to a number of risks, including the competition Move.com Group
faces from other companies in hiring and retaining sales personnel and the
length of time it takes new sales personnel to become productive. Move.com
Group is dependent on sales of its advertising products and services and
Move.com Group's business, results of operations and financial condition
could be materially adversely affected if it does not maintain an effective
advertising sales department.
POTENTIAL FLUCTUATIONS IN MOVE.COM GROUP'S QUARTERLY FINANCIAL RESULTS MAKE
FINANCIAL FORECASTING DIFFICULT.
Move.com Group's quarterly operating results may fluctuate
significantly in the future as a result of a variety of factors, many of
which are outside Move.com Group's control. We believe that
quarter-to-quarter comparisons of Move.com Group's operating results may
not be a good indication of Move.com Group's future performance, nor would
Move.com Group's operating results for any particular quarter be indicative
of future operating results. Due to Move.com Group's limited operating
history and the emerging nature of the Internet real estate market, we
cannot firmly predict Move.com Group's future revenue or results of
operations. In some future quarters Move.com Group's operating results may
be below the expectations of public market analysts and investors. In such
an event, the price of Move.com stock may fall.
Important factors which could cause Move.com Group's results to
fluctuate materially include:
o overall usage levels of the Internet and of the move.com network
in particular;
o seasonal trends in Internet use and advertising;
o the amount of advertising sold and timing of payments for this
advertising;
o Move.com Group's ability to attract and retain users,
advertisers and sponsors;
o the amount and timing of Move.com Group's operating expenses and
capital expenditures;
o new Internet sites, services or products introduced by us or our
competitors;
o costs related to acquisitions of businesses and technologies;
o Move.com Group's ability to upgrade and develop its systems and
infrastructure and attract new personnel in a timely and
effective manner;
o Move.com Group's ability to successfully integrate operations
and technologies from any acquisitions, joint ventures or other
business combinations or investments; and
o technical difficulties or system downtime affecting the
operation of the move.com network of sites.
WE MAY BE UNABLE TO MANAGE OUR GROWTH, WHICH MAY HARM OUR BUSINESS.
Move.com Group's operations have experienced rapid growth. Move.com
Group's rapid growth has placed, and the anticipated future growth for
Move.com Group will continue to place, a significant strain on Move.com
Group's managerial, operational and financial resources. To manage Move.com
Group's growth, it must continue to implement and improve its managerial
controls and procedures and operational and financial systems. In addition,
Move.com Group's future success will depend on its ability to expand, train
and manage its workforce, in particular Move.com Group's advertising, sales
and business development staff. As of January 5, 2000, Move.com Group had a
total of 178 full time employees. We expect that the number of Move.com
Group's employees will continue to increase for the foreseeable future.
Move.com Group will need to integrate these employees into its workforce
successfully. We cannot assure you that Move.com Group has made adequate
allowances for the costs and risks associated with this expansion, that
Move.com Group's systems, procedures or controls will be adequate to
support its operations, or that its management will be able to successfully
offer and expand Move.com Group's services. If Move.com Group is unable to
manage its growth effectively, the quality of Move.com Group's services,
results of operations and financial condition could be materially adversely
affected.
IDENTIFICATION AND INTEGRATION OF FUTURE ACQUISITIONS MAY NOT BE
SUCCESSFUL.
Move.com Group may expand its market and product line through
acquisitions of complementary businesses, products, databases and
technologies. Acquisitions involve numerous risks, including managing the
integration of personnel and products, managing geographically remote
units, the diversion of management's attention from other business
concerns, the inherent risks in entering markets Move.com Group has either
limited or no direct experience in and the potential loss of key employees
or clients of the acquired companies. There can be no assurance that
Move.com Group will not incur unforseen difficulties in connection with
integration of any acquisition. Future acquisitions, if pursued and
consummated by Move.com Group, could result in dilutive issuances of equity
securities, the incurrence of additional debt, one-time write-offs and the
creation of substantial amortization expenses arising from goodwill or
other intangible assets.
ANY CAPACITY CONSTRAINTS OR SYSTEM DISRUPTION COULD HAVE A MATERIAL ADVERSE
EFFECT ON MOVE.COM GROUP.
The performance and reliability of the move.com network
infrastructure are critical to its reputation and ability to attract and
retain users, real estate clients, advertisers, merchants and strategic
partners. Any system error or failure, or a sudden and significant increase
in traffic, may result in the unavailability of its Web sites and
significantly delay response times. Individual, sustained or repeated
occurrences could result in a loss of potential or existing users, real
estate clients, advertisers or strategic partners. In addition, because
Move.com Group's advertising revenue is directly related to the number of
advertisements it delivers to users, system interruptions or delays would
reduce the number of impressions delivered and thereby reduce its revenue.
Move.com Group's systems and operations are vulnerable to
interruption or malfunction due to certain events beyond its control,
including natural disasters, power loss, telecommunication failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and
similar events. Move.com Group also relies on Web browsers and online
service providers to provide Internet access to its sites. We cannot assure
you that Move.com Group will be able to expand its network infrastructure,
either itself or through use of a third party hosting systems or service
providers, on a timely basis sufficient to meet demand. Some of the Web
sites in the move.com network presently have only a limited amount of
redundant facilities or systems, no formal disaster recovery plan and no
sufficient business interruption insurance to compensate for losses that
may occur. Such interruptions could result in financial losses, litigation
or other consumer claims and damage to the Move.com brand. Any interruption
to Move.com Group's systems or operations could have a material adverse
effect on Move.com Group's business and its ability to retain users, real
estate clients, advertisers and strategic partners.
MOVE.COM GROUP'S NETWORKS MAY BE VULNERABLE TO SECURITY RISKS WHICH COULD
DISRUPT THE PERFORMANCE OF THE MOVE.COM NETWORK, REDUCE MOVE.COM GROUP'S
ADVERTISING REVENUE, DECREASE ITS CLIENT AND CONSUMER BASE AND INCREASE ITS
WEB SECURITY EXPENDITURES.
Move.com Group's networks may be vulnerable to unauthorized access,
computer viruses; coordinated attacks by computer hackers and other
security problems. Persons who circumvent security measures could
wrongfully use information of Move.com Group or cause interruptions or
malfunctions in Move.com Group's operations. Concern about the transmission
of confidential information over the Internet has been a significant
barrier to electronic commerce and communications over the Web. Any
well-publicized compromise of security could deter more people from using
the Web or from using it to conduct transactions that involve the
transmission of confidential information, such as purchasing goods or
services. Because many of our advertisers seek to advertise on the move.com
network to encourage people to use the Web to purchase goods or services,
Move.com Group's business, results of operations and financial condition
could be materially adversely affected if Internet users significantly
reduce their use of the Web because of security concerns.
Move.com Group may be required to expend significant resources to
protect against the threat of security breaches or to alleviate problems
caused by any breaches. Although Move.com Group intends to continue to
implement industry-standard security measures, these measures may be
inadequate.
MOVE.COM GROUP DEPENDS ON LICENSED TECHNOLOGY FROM THIRD PARTIES AND
MOVE.COM GROUP'S FAILURE TO MAINTAIN THESE ARRANGEMENTS WITH THIRD PARTIES
COULD ADVERSELY AFFECT ITS BUSINESS.
Move.com Group relies on certain technology licensed from third
parties such as the software for 360(degree) virtual viewing of apartments
and houses, the computer systems of Cendant Mortgage to satisfy offers for
home mortgages, the host of our systems infrastructure, Web and database
servers and third-party providers for use in operating and managing
Move.com Group's Internet sites and providing related services to users and
advertisers. Move.com Group's ability to generate revenue from Internet
commerce may also depend on data encryption and authentication technologies
that it may be required to license from third parties. We cannot assure you
that such technology licenses will be available at all, that they will be
available on reasonable commercial terms or that they will operate as
intended.
In addition, the third-party software currently used in Move.com
Group's products and the delivery of Move.com Goup's services may become
obsolete or incompatible with the products and services Move.com Group
offers in the future. If Move.com Group has to replace third-party software
for any of those reasons, its business could suffer during the replacement
period. Any interruption in these third-party services, or a deterioration
in their performance, could be disruptive to Move.com Group's business. In
the event Move.com Group's arrangement with any of such third parties is
terminated, we may not be able to find an alternative source of systems
support on a timely basis or on commercially reasonable terms.
MOVE.COM GROUP DEPENDS ON ARRANGEMENTS WITH THIRD PARTIES FOR INTERNET
TRAFFIC TO THE MOVE.COM NETWORK AND MOVE.COM GROUP'S FAILURE TO MAINTAIN
THESE ARRANGEMENTS WITH THIRD PARTIES COULD ADVERSELY AFFECT ITS BUSINESS.
Move.com Group's ability to advertise on and maintain links from
other Internet sites is an important element to its success. Traffic
originating from links existing on other Internet sites, particularly
search engines, directories and other navigational tools managed by
Internet service providers and Web browser companies, is an important
segment of the overall traffic on the move.com network. Move.com Group has
special linking arrangements to generate additional traffic with AltaVista
Company, America Online, Inc., Yahoo!, Inc., Excite, Inc., Lycos, Inc.,
Infoseek Corporation (or the GO Network), and Ask Jeeves, Inc. which are
either short-term contracts and/or can be terminated with little notice.
Move.com Group intends to pursue additional distribution relationships in
the future and it may not succeed in these efforts. To secure these
distribution relationships, Move.com Group often pays significant fees.
Move.com Group may not, however, experience sustained increases in user
traffic from these distribution relationships. There is intense competition
for these types of linking arrangements. We cannot assure you that these
arrangements will be maintained or that advertising or links will continue
to be available on reasonable commercial terms or at all. If any of these
agreements is not renewed, Move.com Group would experience a decline in the
number of its users and its competitive position could be significantly
weakened.
MOVE.COM GROUP RELIES ON INTELLECTUAL PROPERTY RIGHTS AND PROPRIETARY
RIGHTS WHICH MAY NOT BE ADEQUATELY PROTECTED UNDER CURRENT LAWS AND MAY BE
SUBJECT TO INTELLECTUAL PROPERTY CLAIMS.
To establish and protect Move.com Group's trademarks, service marks
and other proprietary rights in its products and services, Move.com Group
relies on a combination of trademark, copyright, unfair competition,
service mark and trade secret laws, confidentiality agreements and other
contractual arrangements with its employees, affiliates, clients, strategic
partners and others. The protective steps we have taken may be inadequate
to deter misappropriation of Move.com Group's proprietary information, and
certain tradenames, trademarks and servicemarks used by Move.com Group may
not be protectable. In addition, there can be no assurance that other
parties will not assert claims of infringement of intellectual property
against us or one of our subsidiaries which is part of the Move.com Group.
We may be unable to detect the unauthorized use of, or take appropriate
steps to enforce, our intellectual property rights. Failure to adequately
protect Move.com Group's intellectual property could harm the Move.com
brand, devalue Move.com Group's proprietary content and affect its ability
to compete effectively. Move.com Group entities may be subject to claims of
alleged infringement of the trademarks and other intellectual property
rights of third parties. If such claims are successful, those entities may
be required to change their trademarks, alter their content or pay
financial damages. Further, defending Move.com Group's intellectual
property rights could result in the expenditure of significant financial
and managerial resources, which could materially adversely affect Move.com
Group's business, results of operations and financial condition. There can
be no assurance that any such claims or the defense of such claims will not
adversely affect Move.com Group's business.
Legal standards relating to the validity, enforceability and scope
of protection of certain proprietary rights in Internet-related businesses
are uncertain and evolving, and we can give no assurance regarding the
future viability or value of any of Move.com Group's proprietary rights.
Move.com Group may be required to obtain licenses from others to
refine, develop, market and deliver new services. There can be no assurance
that Move.com Group will be able to obtain such licenses on commercially
reasonable terms or at all or that rights granted pursuant to any licenses
will be valid and enforceable.
MOVE.COM GROUP WILL NEED TO INTRODUCE NEW SERVICES AND PRODUCTS TO REMAIN
COMPETITIVE.
Move.com Group's future success depends in part on its ability to
develop and enhance its services and products. We anticipate that Move.com
Group will introduce additional and enhanced services in order to retain
Move.com Group's current clients and consumers and attract new clients and
consumers. If Move.com Group introduces a service that is not favorably
received, Move.com Group's current clients and consumers may choose a
competitive service over Move.com Group's. We may also experience
difficulties that could delay or prevent Move.com Group from introducing
new services. Furthermore, the new services Move.com Group may introduce
could contain errors that are discovered after these services are
introduced. Move.com Group's business, results of operations and financial
condition could be materially adversely affected if Move.com Group
experiences difficulties in introducing new services or if these new
services are not accepted by Move.com Group's clients and consumers.
MOVE.COM GROUP'S BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO
SUCCEED AND WE CANNOT ASSURE YOU THAT MOVE.COM GROUP WILL CONTINUE TO
DEVELOP THE MOVE.COM BRAND.
We cannot assure you that efforts to build brand awareness will be
successful, and such failure would cause Move.com Group's financial
performance to suffer. We believe that brand identity is important to
attracting and expanding Move.com Group's user base, Internet traffic and
advertising and commerce relationships. Move.com Group believes the
significance of brand recognition will intensify as the number of Web sites
offering relocation services, real estate listings and related services
increases.
Move.com Group's brand-building efforts will involve significant
expense. If Move.com Group's brand enhancement strategy is unsuccessful,
these expenses may never be recovered and Move.com Group's future revenue
may not increase. In addition, even if brand-recognition increases, the
number of new users or the number of transactions on the move.com network
may not increase. Also, even if the number of new users increases, those
users may not use the move.com network on a regular basis.
There are thousands of Web site addresses, or "domain names"
containing the word "move," that have been registered to other users. To
the extent consumers confuse other Web sites with those of Move.com Group,
Move.com Group's reputation could be harmed and its business could suffer.
WE ARE CONTRACTUALLY RESTRICTED UNTIL SEPTEMBER 2002 FROM DISTRIBUTING
LISTINGS TO THIRD PARTIES OR AGGREGATING LISTINGS FROM THIRD PARTIES ON THE
MOVE.COM NETWORK AND THEREFORE MOVE.COM GROUP'S ABILITY TO EXPAND ITS
LISTINGS IS LIMITED.
Under the terms of an agreement with an affiliate of homestore.com
that expires in September 2002, we have agreed not to distribute or license
individual home listings other than those represented by Cendant's real
estate franchise systems on the move.com network. Under the same agreement,
we may not aggregate home listings other than those represented by
Cendant's real estate franchise systems. If possessing a larger number of
home listings becomes an essential aspect of competing in the online
relocation and real estate industries, Move.com Group's competitiveness may
be reduced.
MOVE.COM GROUP MAY BE UNABLE TO SECURE MORTGAGE BROKER LICENSES IN ALL
STATES.
Although Move.com Group's licenses are pending in all 50 states and
the District of Columbia, Move.com is not currently authorized to do
business as a mortgage broker. If Move.com fails to secure or maintain
license approvals and exemptions throughout the country, Move.com Group may
be unable to transact mortgages in some states, and consequently may not
achieve expected revenue goals.
RISKS RELATED TO MOVE.COM GROUP'S INDUSTRY
MOVE.COM GROUP DEPENDS ON INCREASED USE OF THE INTERNET TO EXPAND ITS
RELOCATION AND REAL ESTATE-RELATED ADVERTISING PRODUCTS AND SERVICES.
If the Internet fails to become a viable marketplace for relocation
or real estate content and information, Move.com Group's business will not
grow. Broad acceptance and adoption of the Internet by consumers and
businesses when searching for relocation, real estate and related products
and services will only occur if the Internet provides them with greater
efficiencies and improved access to information. Move.com Group depends on
selling many types of advertisements on the move.com network.
Move.com Group's business would be adversely affected if the market
for Internet advertising fails to develop or develops more slowly than
expected. Move.com Group's ability to generate advertising revenue from
selling banner advertising and sponsorships on the move.com network will
depend on, among other factors, the development of the Internet as an
advertising medium, the amount of traffic on the move.com network and its
ability to achieve and demonstrate user demographic characteristics that
are attractive to advertisers. Most potential advertisers and their
advertising agencies have only limited experience with the Internet as an
advertising medium and have not devoted a significant portion of their
advertising expenditures to Internet-based advertising. No standards have
been widely accepted to measure the effectiveness of Web advertising. If
these standards develop, existing advertisers might reduce their current
levels of Internet advertising or eliminate their spending entirely. The
widespread adoption of technologies that permit Internet users to
selectively block out unwanted graphics, including advertisements attached
to Web pages, also could adversely affect the growth of the Internet as an
advertising medium. In addition, advertisers in the real estate industry,
including real estate professionals, have traditionally relied upon other
advertising media, such as newsprint and magazines, and have invested
substantial resources in other advertising methods. These persons may be
reluctant to adopt a new strategy and advertise on the Internet.
INCREASED GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE WEB
COULD INCREASE MOVE.COM GROUP'S COSTS OF TRANSMITTING DATA AND INCREASE
MOVE.COM GROUP'S LEGAL AND REGULATORY EXPENDITURES AND COULD DECREASE
MOVE.COM GROUP'S BUSINESS PARTNER AND CONSUMER BASE.
Existing domestic and international laws or regulations
specifically regulate communications or commerce on the Internet. A number
of legislative and regulatory proposals under consideration by federal,
state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including:
o online content;
o user privacy;
o taxation;
o access charges;
o liability for third-party activities; and
o jurisdiction.
Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and online
services providers in a manner similar to the regulation of long-distance
telephone carriers and to impose access fees on such companies. This
regulation, if imposed, could increase the cost of transmitting data over
the Internet. Moreover, it may take years to determine the extent to which
existing laws relating to issues such as intellectual property ownership
and infringement and personal privacy are applicable to the Internet. The
Federal Trade Commission and government agencies in certain states have
been investigating certain Internet companies regarding their use of
personal information. We could incur additional expenses if any new
regulations regarding the use of personal information are introduced or if
these agencies choose to investigate our privacy practices. Any new laws or
regulations relating to the Internet, or certain application or
interpretation of existing laws, could decrease the growth in the use of
the Internet, decrease the demand for products and services offered on the
move.com network or otherwise materially adversely affect Move.com Group's
business.
AN INCREASE IN INTEREST RATES MAY REDUCE MORTGAGE TRANSACTIONS.
A high percentage of mortgage loan transactions involve the
refinancing of existing mortgages. Homeowners are motivated to refinance
primarily when interest rates fall below the rates of their existing
mortgages. In the event interest rates increase significantly, homeowners'
incentive to refinance will be greatly reduced and the number of loans that
the industry originates could decline significantly. Similarly, if there
were a sustained increase in interest rates, there would eventually be some
impact on the market for purchase mortgages as higher monthly payments
would make housing less affordable.
IF MOVE.COM GROUP IS UNABLE TO COMPLY WITH MORTGAGE BROKERAGE RULES AND
REGULATIONS, MOVE.COM GROUP'S ABILITY TO ACT AS A MORTGAGE BROKER MAY BE
RESTRICTED.
The mortgage brokering business is heavily regulated under federal
and state laws. These laws and related regulations impose numerous
obligations and restrictions on Move.com Group's activities. In particular,
these rules limit the broker fees Move.com Group may assess, require
extensive disclosure to consumers, regulate advertising practices, prohibit
discrimination and impose on Move.com Group's multiple qualification and
licensing obligations. Move.com Group may not always be in compliance with
these requirements.
Move.com Group's failure to comply with these standards could lead
to revocation of required licenses or registrations, loss of approved
status, voiding of loan contracts, demands for loan repurchases from
mortgage loan purchasers, class action lawsuits and administrative
enforcement actions. These regulatory requirements are subject to change
and may in the future become more restrictive, making compliance more
difficult or expensive or otherwise restricting our ability to conduct our
business. At the state level, we are subject to licensing and regulation in
most of the states where we act as a mortgage broker.
Further, given our goals of creating a more integrated consumer
experience around the home-buying process, we will increasingly find
ourselves in a position where we market settlement services provided by
vendors with whom we have business relationships or provide additional
services ourselves in a way that may cause us to unintentionally be in
violation of these rules.
Many federal laws and regulations that limit brokers' fees are
unclear. In the last three years there has been significant litigation
concerning limits on mortgage broker fees. The lack of clarity in this area
of law is compounded when applied to mortgage brokers and lenders operating
in an Internet environment and it is possible that plaintiffs' attorneys
may attempt to assert similar allegations against Internet lenders.
RISKS RELATED TO CENDANT
DISCOVERY OF ACCOUNTING IRREGULARITIES AND RELATED LITIGATION AND
SEC INVESTIGATION
Since the April 15, 1998 announcement of the discovery of
accounting irregularities in the former business units of CUC
International, Inc., the predecessor of Cendant, approximately 70 lawsuits
claiming to be class action lawsuits, two lawsuits claiming to be brought
derivatively on Cendant's behalf and several individual lawsuits and
arbitration proceedings have been commenced in various courts and other
forums against Cendant and other defendants, asserting various claims under
the federal securities laws and certain state statutory and common laws,
including claims that Cendant's previously issued financial statements
allegedly were false and misleading and that Cendant allegedly knew or
should have known that they caused the price of Cendant's securities to be
artificially inflated. In addition, the staff of the SEC and the United
States Attorney for the District of New Jersey are conducting
investigations relating to the accounting issues. The SEC Staff has advised
Cendant that its inquiry should not be construed as an indication by the
SEC or its staff that any violations of law have occurred. For a full
description of such litigation and proceedings, see Cendant's Annual Report
on Form 10-K/A for the fiscal year ending December 31, 1998.
On December 7, 1999, we announced that Cendant reached a
preliminary agreement to settle the principal securities class action
pending against it in the U.S. District Court in Newark, New Jersey
relating to the aforementioned class action lawsuits. Under the agreement,
Cendant would pay the class members $2.83 billion in cash. The settlement
remains subject to execution of a definitive settlement agreement and
approval by the U.S. District Court. If the preliminary settlement is not
approved by the U.S. District Court, Cendant can make no assurances that
the final outcome or settlement of such proceedings will not be for an
amount greater than that set forth in the preliminary agreement. If the
preliminary agreement is not approved and the final outcome is for an
amount greater than previously agreed, it could have an adverse impact on
the price of Move.com stock. For a description of the preliminary agreement
to settle the common stock class action litigation, see Cendant's Form 8-K,
dated December 7, 1999.
FORWARD LOOKING STATEMENTS; MARKET DATA
Certain statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Move.com Group" and
"Business," and elsewhere in this prospectus are "forward-looking
statements." These forward-looking statements include, but are not limited
to, statements about our plans, objectives, expectations, intentions and
assumptions and other statements that are not historical facts. When used
in this prospectus, the words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," and similar expressions are generally
intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, actual results
may differ materially from those expressed or implied by these
forward-looking statements. We do not intend to update or revise any
forward- looking statements, whether as a result of new information, future
events or otherwise.
This prospectus contains market data related to the residential
real estate and Internet industries. This data has been included in the
studies published by the Internet market research firms of Media Metrix,
Forrester Research and International Data Corporation and the real estate
information was obtained from various industry sources, including Realty
Times and the National Association of Realtors. Although we believe that
data from these companies is generally reliable, this type of data is
inherently imprecise and we have not independently verified such data. We
caution you not to place undue reliance on this data.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, prospectuses, proxy statements and other
information with the SEC. You may read and copy any reports, proxy
statements or other information we file at the SEC's public reference rooms
in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. The SEC filings of Cendant Corporation are also available to the
public from commercial document retrieval services and at the Web site
maintained by the SEC at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" information into
this prospectus. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this
prospectus, except for any information superseded by information in this
prospectus or in any subsequently filed document that is incorporated by
reference in this prospectus. This prospectus incorporates by reference the
documents set forth below that we have previously filed with the SEC. These
documents contain important information about Cendant and its finances.
CENDANT CORPORATION SEC FILINGS (FILE NO. 1-10308) PERIOD
- ---------------------------------------------------------
Annual Report on Form 10-K/A Year ended December 31, 1998
Quarterly Report on Form 10-Q/A Quarter ended March 31, 1999
Quarterly Report on Form 10-Q/A Quarter ended June 30, 1999
Quarterly Report on Form 10-Q/A Quarter ended September 30, 1999
Current Report on Form 8-K December 2, 1999
Current Report on Form 8-K December 7, 1999
Current Report on From 8-K February 3, 2000
We also incorporate by reference any future filings made with the
SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, prior to the termination of the offering.
We will provide you without charge upon written or oral request, a
copy of any or all of the documents that are incorporated by reference into
this prospectus. However, we will not send exhibits to such documents,
unless the exhibits are specifically incorporated by reference in such
documents. Requests should be directed to Cendant Corporation, 9 West 57th
Street, New York, New York 10019, Attention: Investor Relations, Telephone:
(212) 413-1800.
We intend to provide you with annual reports containing financial
statements relating to Move.com Group and Cendant audited by our
independent public accountants, with a discussion of such financial
information and including a summary of Move.com Group's business.
You should rely only on the information contained in this
prospectus. We have not authorized anyone to give any information or make
any representation about us or this offering that is different from, or in
addition to, that contained in this prospectus or in the materials that we
have incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to sell, or solicitations of offers to buy, the
securities offered by this document are unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then the offer
presented in this document does not extend to you. The information
contained in this document speaks only as of the date of this document
unless the information specifically indicates that another date applies.
USE OF PROCEEDS
We estimate that the net proceeds to Move.com Group from the sale
of the _____ shares of Move.com stock offered by this prospectus will be
approximately $________ ($________ if the underwriters' over-allotment
option is exercised in full), at an assumed initial public offering price
of $____ per share and, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us. We
will allocate all of the net proceeds from this offering to Move.com Group,
including any net proceeds from the exercise of the underwriters' over-
allotment option.
The principal purposes of this offering are to provide working
capital to increase marketing expenditures, develop new products and expand
the move.com network, to fund general corporate purposes, to create a
public market for our Move.com stock and to facilitate our future access to
the public capital markets. In addition, we may use a portion of the net
proceeds to acquire or invest in complementary businesses, technologies,
services or products. However, we currently have no commitments or
agreements with respect to any such transactions. Pending such uses, the
net proceeds will be invested in short-term investment-grade instruments,
certificates of deposit or direct or guaranteed obligations of the U.S.
government or may be loaned to Cendant Group as an intercompany revolving
credit balance. See "Cash Management and Allocation Policies".
DIVIDEND POLICY
We do not expect to pay any dividends for the foreseeable future on
Move.com stock. We will, however, be permitted to pay dividends on:
o CD stock out of the assets of Cendant legally available for
the payment of dividends under Delaware law, but the total
amounts paid as dividends on CD stock cannot exceed the
available dividend amount for Cendant Group; and
o Move.com stock out of the assets of Cendant legally
available for the payment of dividends under Delaware law
(and transfer corresponding amounts to Cendant Group in
respect of its retained interest in Move.com Group), but the
total of the amounts paid as dividends on Move.com stock and
the corresponding amounts transferred to Cendant Group in
respect of its retained interest in Move.com Group cannot
exceed the available dividend amount for Move.com Group.
The "available dividend amount" for Cendant Group and Move.com
Group, as the case may be, is based on the amount that would be legally
available for the payment of dividends under Delaware law if either Cendant
Group or Move.com Group, as applicable, was a single, separate Delaware
corporation. For more information on the "available dividend amount" for
Cendant Group and Move.com Group, see "Description of Capital
Stock--Dividends." We expect that determinations to pay dividends on
Move.com stock would be based primarily upon the financial condition,
results of operations, capital requirements, any restrictions contained in
financing or other agreements binding upon us and other factors that the
board of directors deems relevant.
CAPITALIZATION
The following table sets forth the capitalization of Cendant as of
September 30, 1999 and Move.com Group as of December 31, 1999 and, in each
case, as adjusted to give effect to:
o the re-classification of existing common stock of Cendant
into CD stock and the creation of Move.com stock, and
o the offering at an assumed initial public offering price of
$ per share, after deducting estimated underwriting
discounts and estimated expenses and assuming the
underwriters do not exercise their option to purchase
additional shares.
These tables should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Move.com Group" and the combined financial statements and the notes to
those statements included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Cendant" and the consolidated financial statements incorporated by reference
in this prospectus.
<TABLE>
<CAPTION>
CENDANT CORPORATION
AS OF SEPTEMBER 30, 1999
----------------------------------
ACTUAL AS ADJUSTED
-------------- --------------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents............................... $ 623.5
==============
Long-term debt (1)...................................... 3,344.3
--------------
Mandatorily redeemable preferred securities issued
by subsidiary trust holding solely senior debentures
issued by Cendant..................................... 1,475.9
Shareholders' equity:
Preferred stock, $0.01 par value, 10 million shares
authorized; none issued and outstanding............... -
Move.com stock, $0.01 par value, 500 million shares
authorized; no shares issued, and outstanding, as
reported; and outstanding, as adjusted................
CD stock, $0.01 par value, 2 billion shares
authorized; issued 867,189,539........................ 8.7
Additional paid-in capital.............................. 4,025.0
Retained earnings....................................... 2,906.2
Accumulated other comprehensive loss.................... (15.1)
Treasury stock, at cost, 155,070,397 shares............. (3,075.5)
--------------
Total shareholders' equity.............................. 3,849.3
--------------
Total capitalization.................................... $ 8,669.5
==============
Net book value per share................................ $ 5.41
==============
Net tangible book value per share....................... $ (0.61)
==============
- --------------------
(1) Long-term debt excludes an aggregate of $2.8 billion of indebtedness of
PHH, one of our subsidiaries, which is self- sufficient in managing its
funding sources to ensure adequate liquidity to finance assets under
management.
</TABLE>
<TABLE>
<CAPTION>
MOVE.COM GROUP
AS OF DECEMBER 31, 1999
----------------------------------
ACTUAL AS ADJUSTED
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................... $ 1,009
============== ==============
Group equity............................................ $ 1,025
-------------- --------------
Total capitalization.................................... $ 1,025 $ -
============== ==============
</TABLE>
SELECTED FINANCIAL DATA OF MOVE.COM GROUP
The following selected combined financial data is qualified by
reference to, and should be read in conjunction with, the combined
financial statements and the notes to those statements for Move.com Group
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Move.com Group" appearing elsewhere in this
prospectus. The selected combined statement of operations data presented
below for the period from February 8, 1996 (the Rent Net acquisition date)
through December 31, 1999 are derived from Move.com Group's combined
financial statements. The combined financial data of Move.com Group should
be read in conjunction with the consolidated financial statements of
Cendant incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 8, 1996
(THE RENT NET
ACQUISITION DATE)
AS OF OR FOR THE THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------
1999 1998 1997 1996
---------- ----------- ----------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Net revenue $ 17,647 $ 9,674 $ 5,670 $ 1,081
Cost of revenue 3,149 1,664 1,091 632
---------- ----------- ----------- ---------------
Gross profit 14,498 8,010 4,579 449
---------- ----------- ----------- ---------------
Operating expenses:
Product development 3,940 193 - 14
Selling and marketing 16,020 5,484 3,906 2,335
General and administrative 16,751 1,922 1,227 604
Depreciation and amortization 2,217 1,826 934 604
---------- ----------- ----------- ---------------
Total operating expenses 38,928 9,425 6,067 3,557
---------- ----------- ----------- ---------------
Loss before income tax benefit (24,430) (1,415) (1,488) (3,108)
---------- ----------- ----------- ---------------
Income tax benefit 9,976 572 603 1,266
---------- ----------- ----------- ---------------
Net loss $ (14,454) $ (843) $ (885) $ (1,842)
========== =========== =========== ===============
Pro forma basic and diluted net loss
per share (1)
Pro forma weighted average basic and
diluted shares outstanding (1)
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,009 $ - $ - $ -
Working capital deficit (9,296) (1,497) (785) (287)
Total assets 22,000 8,614 7,417 3,559
Total liabilities 20,975 4,379 2,181 878
Group equity 1,025 4,235 5,236 2,681
</TABLE>
- ---------------
(1) Share amounts include shares effectively owned by Cendant through
its retained interest in Move.com Group. Pro forma basic and
diluted earnings per common share amounts have been calculated by
dividing net income applicable to common shares by the pro forma
weighted average common shares outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MOVE.COM GROUP
The following discussion of the financial condition and results of
operations of Move.com Group should be read in conjunction with the
combined financial statements and related notes included elsewhere in this
prospectus and the consolidated financial statements and related notes of
Cendant incorporated by reference in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties.
Move.com Group's actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
Move.com Group provides a broad range of quality relocation, real
estate and home-related products and services through its flagship portal
site, move.com, and the move.com network. The move.com Web site was
launched on January 27, 2000. Move.com Group's operations include the
move.com network and the businesses of (1) Rent Net (an operator of online
rental guides acquired in February 1996); (2) Metro-Rent, Inc. (an online
provider of fee-based apartment vacancy reports, acquired in December
1999); (3) National Home Connections, LLC (a facilitator of connecting and
disconnecting utilities, processor of address changes and provider of
moving-related products and services, acquired in May 1999); and (4)
Move.com Mortgage, Inc. (a mortgage marketing company).
The offline resources of Cendant as well as individual Web sites of
each of Cendant's real estate franchise systems are part of Cendant Group,
which includes all of the businesses operated by Cendant other than the
businesses that are part of Move.com Group. However, the franchise systems'
Web sites are considered part of the move.com network as a result of
Intercompany Agreements that permit Move.com Group to manage and sell
advertisements on these sites and display home listings from the CENTURY
21(R), COLDWELL BANKER(R) and ERA(R) real estate franchise systems. Through
an additional Intercompany Agreement, Move.com Group provides online local
merchant discount offers for customers of Welcome Wagon, a distributor of
welcoming packages to new homeowners and consumers throughout the United
States and Canada. Move.com Group allows users to apply for and obtain
mortgage products and services through arrangements with Cendant Mortgage
Corporation, provides users with relocation services and information
leveraging Cendant Mobility's expertise, and provides users with access to
third-party providers of relocation, real estate and home-related content
and services.
Move.com Group is accounted for as a single business segment,
although net revenue is derived from four primary sources: subscriptions,
sponsorships, e-commerce and other revenue. Subscription revenue includes
listing fees paid by various apartment, senior housing, corporate housing
and self storage managers. Sponsorship revenue includes advertising and
lead-generation fees paid by business partners. E-commerce revenue includes
revenue from Welcome Wagon and transaction-based fees from consumers and
business partners, related to mortgage referrals, MetroRent and National
Home Connections. Other revenue includes fees for Web site management and
marketing fees from an online home listing agreement.
Move.com Group has not achieved profitability on a quarterly or
annual basis to date, and anticipates that it will incur higher net losses
in the future. The extent of these losses will depend, in part, on the
amount and rates of growth in Move.com Group's net revenue from
subscriptions, sponsorships and e-commerce. Move.com Group expects its
operating expenses to increase significantly, especially in the areas of
sales and marketing. As a result, Move.com Group will need to increase its
net revenue to achieve profitability. Move.com Group believes that pro
forma period-to- period comparisons of its operating results are not
meaningful and that you should not rely upon the results for any period as
an indication of future performance. Move.com Group's business, results of
operations and financial condition will be materially and adversely
affected if:
o net revenue does not grow at anticipated rates;
o increases in operating expenses are not offset by commensurate
increases in net revenue; and
o it is unable to adjust operating expense levels in response
lower than expected net revenue.
Move.com Group intends to continue making acquisitions to increase
online reach and traffic and to seek additional strategic alliances with
content and distribution partners.
Move.com Group cannot guarantee that it will be able to
successfully integrate any businesses, products, technologies or personnel
that might be acquired in the future. A failure to integrate acquired
entities or assets successfully could seriously harm Move.com Group's
business, results of operations and financial condition. In addition,
Move.com Group cannot guarantee that it will be successful in identifying
and closing transactions with potential acquisition candidates.
RECENT EVENTS
ALTAVISTA ALLIANCE
On January 27, 2000, Move.com Group announced a strategic alliance
with AltaVista Company, a new-media and commerce network, to create a
co-branded real estate channel on the AltaVista Web site. Under the terms
of the agreement, Move.com Group will pay AltaVista up to $40 million to be
an exclusive real estate content provider of the new AltaVista Real Estate
Channel. In addition, the move.com network will be exclusively featured
through banners and links on keyword searches for most real estate and
moving-related terms. The agreement has a three year term.
WELCOME WAGON AGREEMENT
On January 1, 2000, Move.com Group entered into an Internet
Cooperation Agreement with Getko Group, Inc., a wholly owned subsidiary of
Cendant which owns the right to the Welcome Wagon brand name. Under the
terms of the 3-year agreement, Move.com Group will develop, host and
maintain the Welcome Wagon area of move.com in return for an escalating
percentage of Getko's revenue and expenses.
METRORENT ACQUISITION
On December 17, 1999, Move.com Group purchased substantially all of
the assets and assumed substantially all of the liabilities of MetroRent,
an online provider of apartment rental listings for buildings with
twenty-five or fewer units, for a total consideration of up to $3 million
in cash and up to $6 million of Move.com stock to be paid over several
years subject to meeting certain performance targets. The stock portion of
the consideration consists of a new class of nonvoting common stock of
Move.com, Inc., which is mandatorily redeemable for Move.com stock upon a
public offering of Move.com stock. The Move.com, Inc. nonvoting common
stock is redeemable for up to 293,000 shares of Move.com stock valued at
$20.51 per share. In the event that a public offering has not occurred by
December 31, 2005, Move.com, Inc. must redeem each outstanding share of
Move.com, Inc. common stock for cash and may do so at any time at its
option.
CHATHAM STREET HOLDINGS, LLC AGREEMENT
In September 1999, Cendant entered into an agreement with Chatham
Street Holdings, LLC pursuant to which Chatham was granted the right, until
September 30, 2001, to purchase up to 1,561,000 shares of Move.com stock
for approximately $16.02 per share. In addition, for every two shares of
Move.com stock purchased by Chatham pursuant to the agreement, Chatham will
be entitled to receive a warrant to purchase one share of Move.com stock at
a price equal to $64.08 per share and a warrant to purchase one share of
Move.com stock at a price equal to $128.16 per share.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS - 1999 VS 1998
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 % CHANGE
------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenue $ 17,647 $ 9,674 82%
Cost of revenue 3,149 1,664 89%
------------- ------------
Gross profit 14,498 8,010 81%
Gross margin 82% 83%
Operating expenses 38,928 9,425 313%
------------- ------------
Loss before income tax benefit (24,430) (1,415) *
Income tax benefit 9,976 572 *
------------- ------------
Net loss $ (14,454) $ (843) *
============= ============
* Not meaningful
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net revenue increased $7,973 or 82% in 1999 over 1998. Subscription
revenue increased $4,320 or 51% to $12,786 in 1999 due primarily to an
increase in apartment listing revenue of $3,094. The listing revenue
increased primarily due to a 26% increase in apartment listing prices and a
19% increase in the number of apartments communities listed. The remaining
increase in subscription revenue is due to increased listings in the
categories of senior housing, corporate housing and self storage listing
products. Sponsorship revenue increased $2,414 or 200% due primarily to the
creation of a new business development department that established
relationships with new business partners. Sponsorship revenue was also due
to a marketing fee received from Cendant Mortgage Corporation. There was no
e-commerce revenue in 1999 or 1998. Other revenue of $1,373 in
1999 primarily included $811 for marketing fees pertaining to an online
home listings agreement that Cendant assigned to the Move.com Group at its
creation and approximately $429 for fees received for managing the Web
sites of Cendant's real estate franchise systems. National Home Connections
and MetroRent revenue were insignificant in 1999 due to the timing of the
acquisitions of such entities.
Cost of revenue increased $1,485 or 89% to $3,149 in 1999 over
1998. Cost of revenue consists primarily of cost associated with
maintenance and support of the move.com network including compensation,
consulting fees, equipment lease costs, bandwidth and related indirect
costs. The overall increase is primarily due to costs associated with the
direct management of the Web sites for Cendant's real estate franchise
systems plus additional compensation costs incurred to support growth in
the business.
Operating expenses increased $29,503 or 313% in 1999 over 1998.
Product development expenses increased $3,747 or 1,941% to $3,940, in 1999
due to the hiring of staff and approximately $2,000 for external
consultants retained to build the move.com network. Product development
expenses includes internal and external personnel costs and certain
software licenses used to develop the move.com network including the look
and feel of the Web pages and the underlying functionality of the Web
sites. In 1998, development costs were minimal.
Selling and marketing expenses increased $10,536 or 192% in 1999
over 1998 due to increased advertising and the hiring of additional staff.
Advertising expenses increased $8,324 during 1999 due to the launch of the
first television and radio commercials for Rent Net during the third
quarter of 1999 and a further expansion of online distribution. Online
advertising in 1999 included new distribution on the Ask Jeeves and
Goto.com Web sites and expanded distribution on America Online, Yahoo!,
Excite, Lycos and the GO Network. Compensation expense increased $1,660 or
62% during 1999 due to the creation of an online advertising department, a
business development department and the expansion of Move.com Group's
national field sales force for its subscription products.
General and administrative expenses increased $14,829 or 772% in
1999 over 1998 due primarily to compensation- related matters. During 1999,
expenses of $9,625 were incurred as part of a one-time, broad-based bonus
retention program initiated by Cendant. Payroll and related expenses
increased $1,174 or 172% due to the hiring of additional members of the
executive management team and other additional staff. Recruiting expenses
associated with these hirings were $1,038 in 1999.
Depreciation expense increased $103 or 55% in 1999 due primarily to
the purchase of computers for additional staff hired and depreciation of
computer equipment purchased for National Home Connections. Amortization
expense increased $288 or 18% due primarily to an increase in amortization
of intangibles resulting from the National Home Connections acquisition.
Move.com Group's effective tax rate increased to 40.8% in 1999,
from 40.4% in 1998.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS - 1998 VS 1997
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 % CHANGE
----------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue $ 9,674 $ 5,670 71%
Cost of revenue 1,664 1,091 53%
----------- ------------
Gross profit 8,010 4,579 75%
Gross margin 83% 81%
Operating expenses 9,425 6,067 55%
----------- ------------
Loss before income tax benefit (1,415) (1,488) (5%)
Income tax benefit 572 603 (5%)
----------- ------------
Net loss $ (843) $ (885) (5%)
=========== ============
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net revenue increased $4,004 or 71% in 1998 over 1997. Subscription
revenue increased $3,347 or 65% to $8,466 in 1998 primarily due to an
increase in apartment listing revenue of $2,789. The listing revenue
increased due to a 40% increase in prices and a 31% increase in the number
of communities listed. Sponsorship revenue increased $657 or 119% to $1,208
due to the addition of new sponsors on Rent Net.
Cost of revenue increased $573 or 53% in 1998 over 1997. The
overall increase in costs is primarily related to Web server rental cost
increases of $216 and higher personnel expenses.
Total operating expenses increased $3,358 or 55% in 1998 over 1997.
Product development expenses of $193 in 1998 were incurred to refine Rent
Net. There were no product development expenses in 1997. Selling and
marketing expenses increased $1,578 or 40% due primarily to increased
online distribution costs of $834 or 76% and an increase in compensation
expenses of $701 or 36% due to the continued expansion of Move.com Group's
sales staff. General and administrative expenses increased $695 or 57%
including compensation increases of $186 or 37% and $234 or 365% in higher
rent associated with relocation.
Depreciation and amortization expenses increased $892 or 96% as a
result of incremental goodwill amortization related to additional payments
during 1997 to the sellers of Rent Net.
Move.com Group's effective tax rate was 40.4% and 40.5% during 1998
and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cendant manages treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the
issuance, repayment and repurchase of short-term and long-term debt and the
issuance and repurchase of common stock and preferred stock. Move.com Group
generally remits its cash receipts to Cendant, and Cendant generally funds
Move.com Group's cash disbursements on a daily basis.
In the historical financial statements of Cendant and Move.com
Group (1) all external debt and equity transactions (and the proceeds
thereof) were attributed to Cendant Group, (2) whenever Move.com Group held
cash, that cash was transferred to Cendant Group and accounted for as a
return of capital (i.e., as a reduction in Move.com Group's Group equity
and Cendant Group's retained interest) and (3) whenever Move.com Group had
a cash need, that cash need was funded by Cendant Group and accounted for
as a capital contribution (i.e., as an increase in Move.com Group equity
and Cendant Group's retained interest). Cendant does not intend to continue
these practices after this offering. Accordingly, no interest expense has
been or will be reflected in Move.com Group's Combined Financial Statements
for any period prior to this offering.
After the date of this offering:
Whenever Move.com Group holds cash, it will normally transfer that
cash to Cendant Group. Conversely, whenever Move.com Group has a cash
requirement, Cendant Group will normally fund that cash requirement.
However, the board of directors of Cendant will determine, in its sole
discretion, whether to provide any particular funds to Move.com Group or
Cendant Group and will not be obligated to do so.
Cendant will account for all cash transfers from one Group to or
for the account of the other (other than transfers in return for assets or
services rendered or transfers in respect of Cendant Group's retained
interest that correspond to dividends paid on Move.com stock), as
inter-Group revolving credit advances unless:
o the board of directors of Cendant determines that a given
transfer (or type of transfer) should be accounted for as a
long-term loan,
o the board of directors of Cendant determines that a given
transfer (or type of transfer) should be accounted for as a
capital contribution increasing Cendant Group's retained
interest in Move.com Group, or
o the board of directors of Cendant determines that a given
transfer (or type of transfer) should be accounted for as a
return of capital reducing Cendant Group's retained interest in
Move.com Group.
There are no specific criteria to determine when Cendant will
account for a cash transfer as a long-term loan, a capital contribution or
a return of capital rather than an inter-Group revolving credit advance.
The board of directors of Cendant would make such a determination in the
exercise of its business judgment at the time of such transfer, or the
first of such type of transfer, based upon all relevant circumstances.
Factors the board of directors would expect to consider include:
o the current and projected capital structure of Move.com Group
and Cendant Group,
o the relative levels of internally generated funds of Move.com
Group and Cendant Group,
o the financing needs and objectives of Move.com Group and Cendant
Group,
o the investment objectives of the transferring Group,
o the availability of, and cost and time required for, alternate
financing sources,
o prevailing interest rates and general economic conditions, and
o the nature of the assets or operations to be financed.
Any cash transfer accounted for as an inter-Group revolving credit
advance may bear interest. Although we currently do not intend to charge
interest on inter-Group revolving credit advances, if the board determines
to charge interest, the combined financial statements of Move.com Group
will not be comparable for periods prior to and after charging interest on
such credit advances. Any cash transfer accounted for as a long-term loan
will have interest rate, amortization, maturity, redemption and other terms
that generally reflect the then prevailing terms on which the board of
directors, in its sole discretion, determines Cendant could borrow such
funds.
Any cash transfer from Cendant Group, or for Move.com Group's
account, accounted for as a capital contribution will correspondingly
increase Move.com Group equity and Cendant Group's retained interest in
Move.com Group. As a result, the number of shares of Move.com stock that
Cendant may issue for the account of Cendant Group with respect to its
retained interest in Move.com Group which we call the "number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group" will increase by the amount of such capital contribution divided by
the market value of Move.com stock on the date of transfer.
Any cash transfer from Move.com Group to Cendant Group, or for
Cendant Group's account, accounted for as a return of capital, will
correspondingly reduce Move.com Group equity and Cendant Group's retained
interest in Move.com Group. As a result, the number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group will
decrease by the amount of such returned capital divided by the market value
of Move.com stock on the date of transfer.
As a result of the cash management policies in place between
Cendant Group and Move.com Group, Move.com Group is dependent on Cendant
Group for continued funding. Accordingly, Move.com Group's liquidity could
be adversely affected by the liquidity needs of Cendant Group.
In September 1999, Cendant entered into an agreement with Chatham
Street Holdings, LLC pursuant to which Chatham was granted the right, until
September 30, 2001, to purchase up to 1,561,000 shares of Move.com stock
for approximately $25 million or $16.02 per share. In addition, for every
two shares of Move.com stock purchased by Chatham pursuant to the
agreement, Chatham will be entitled to receive a warrant to purchase one
share of Move.com stock at a price equal to $64.08 per share and a warrant
to purchase one share of Move.com stock at a price equal to $128.16 per
share. If Chatham exercises its right to purchase shares, Move.com Group
will receive the proceeds from the exercise.
In addition, pursuant to certain employment agreements, Cendant is
required to grant approximately 312,500 options to purchase Move.com stock
at fair market value upon the issuance of Move.com stock to the public.
CASH FLOWS (1999 VS 1998)
Cash flows used in operations were $4,435 in 1999 compared to cash
flows provided by operations of $1,279 in 1998. The decrease in cash flows
was primarily due to the increase in the loss from 1998 to 1999 offset by
changes in working capital, specifically increases in marketing accruals.
Cash flows used in investing activities increased $3,949, due
primarily to cash payments of $2,588 made in connection with the MetroRent
and National Home Connections acquisitions. Additionally, investing
activities included capital expenditures and construction costs associated
with the relocation to a new headquarter.
Net funding from Cendant increased $10,672 due to the funding received
from Cendant to finance the current loss.
From time to time, Cendant may issue additional shares of Move.com
stock in one or more private or public financings. The specific terms of
the financing, including whether they are private or public, the amount of
Move.com stock issued, and the timing of the financing, will depend upon
factors such as stock market conditions and performance of the Move.com
Group.
Move.com Group believes that the net proceeds from this offering,
together with its current cash, cash equivalents and cash generated from
operations will be sufficient to meet its anticipate cash needs for working
capital and capital expenditures through at least the end of 2000.
BUSINESS
Move.com Group operates a popular network of Web sites, which offer
a wide selection of quality relocation, real estate and home-related
products and services. Move.com Group seeks to improve the often stressful
and demanding moving experience by providing a one-source, "friend-in-need"
solution before, during and after the move. Move.com Group strives to
establish strong, long-term relationships with consumers by offering
quality products and services for each phase of the moving process from
finding a home to improving an existing home. Move.com Group also provides
a multi-channel distribution platform for its business partners, who are
trying to reach a highly targeted and valued group of consumers at the most
opportune times.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET
The Internet is revolutionizing the way in which businesses and
consumers interact, share information and consummate transactions.
According to International Data Corporation, or IDC, the number of Internet
users worldwide will grow to approximately 502 million by the end of 2003
from approximately 196 million in 1999. The Internet places at consumers'
fingertips an unprecedented amount of information and offers a convenient
way for them to select and order products and services. The rapid growth in
users combined with the Internet's unique ability to connect a broad range
of consumers and businesses is driving growth in electronic commerce. IDC
estimates that the total value of Internet commerce will increase to $1.3
trillion in 2003 from $111 billion in 1999.
THE RELOCATION MARKETPLACE
According to the most recent data from the U.S. Census Bureau, more
than 40 million Americans, or approximately 15% of the U.S. population,
relocate annually. On average, Americans move once every five to six years.
When consumers buy, sell or rent a home, they typically need assistance
with various relocation services, such as storage, moving supplies and
truck rentals or van lines. Relocation is often a catalyst for significant
expenditures related to the home and becoming established in a new
community. Move.com Group estimates that the average homeowner spends
approximately $9,400 while the average renter spends approximately $3,700
during the 90-day period surrounding a move. Homeowners who move spend more
for home-related purchases in the three months around their move than
established residents spend in five years. Consumers spent approximately
$130 billion in 1999 for home and apartment moves, including moving
services and related product purchases such as household appliances,
furnishings and floor coverings.
THE RESIDENTIAL REAL ESTATE INDUSTRY
BUYING AND SELLING. Recent years have been among the strongest ever
for home sales in the United States. The 1993-1999 period includes seven of
the eight strongest years on record for existing single-family home sales.
The National Association of Realtors, or NAR, estimates that approximately
5.2 million homes were sold in 1999, representing a three-year annual
compound growth rate of 7.3% since 1996, the fourth consecutive annual
record. NAR currently expects home sales to remain strong and total a
robust 4.9 million homes in 2000. Based on average sale prices, the value
of home sales for 1999 totaled approximately $875 billion and represented a
three-year compound annual growth rate of 14%. Moreover, homeowners spent a
record amount of approximately $95 billion on remodeling in 1999.
Real estate brokers and agents are involved in the vast majority of
home sale transactions. Although the real estate brokerage industry is
highly fragmented, franchise systems such as CENTURY 21(R), COLDWELL
BANKER(R) and ERA(R) have steadily increased their market share over the
last decade. Both consumers and real estate professionals are increasingly
relying on the Internet for real estate-related needs and information.
According to a January 2000 Realty Times survey, approximately 37% of
consumers said they would begin a search for a home on the Internet. In
addition, according to a recent California survey, 72% of real estate firms
reported obtaining a portion of their business through the Internet.
Consumers paid approximately $49 billion in transaction fees, such as
mortgage origination fees, insurance premiums and property report fees,
related to home purchases in 1999.
RENTING. Although there are fewer renters than homeowners in the
United States, renters move far more frequently than homeowners. According
to the U.S. Census Bureau, although only approximately 34% of households
live in rental units, they are responsible for 71% of moves. Based on most
recently available data, there are over 37 million rental units in the
United States of which over 3 million are vacant. Property managers and
owners need to advertise frequently to fill vacancies. Move.com Group
believes that most managers of the largest apartment properties with more
than 100 units advertise on a continuous monthly basis, thus creating a
constant demand for listing services. Apartment property managers generally
use online rental guide services as an additional, non-exclusive medium for
advertising. Apartment guide publications that display local listings
typically are distributed free to consumers and published on a monthly or
semi-monthly basis, whereas Internet listing guides generally are updated
far more frequently. In 1998, apartment property managers spent
approximately $1.8 billion on advertising.
Managers of senior housing and self storage facilities also
advertise vacancies on a continuous basis and use similar advertising
channels as apartment managers. As of the end of 1999, there were
approximately 50,000 senior housing properties containing approximately 3.5
million units in the United States. Move.com Group estimates that there are
30,000 self storage facilities in the United States and Canada.
FINANCING. According to Inside Mortgage Finance, residential
mortgage originations totaled $1.4 trillion and $1.3 trillion in 1998 and
1999, respectively. Large-scale mortgage providers, such as Cendant
Mortgage, have garnered an increasing market share. The top 25 lenders
accounted for 57% of mortgage originations in 1999, up from 33% in 1994.
Mortgage origination is well suited to an Internet-based
distribution model. Online mortgage lending can be faster and more
convenient than offline mortgage origination. Forrester Research estimates
online mortgage originations will increase from approximately $19 billion
in 1999 (approximately 1.5% of total mortgage originations) to more than
$91 billion in 2003 (approximately 10% of total mortgage originations),
resulting in a 48% compound annual growth rate over the time period.
ONLINE ADVERTISING
The growth of the Internet has created an important new advertising
channel for a wide variety of product and service providers. In particular,
the emergence of industry-focused sites has allowed advertisers to target
specific groups of consumers with an affinity for and interest in
particular products and services. Tools not available in traditional
advertising media, such as real-time measurement of response rates to
advertising banners, further increase the attractiveness of Internet
advertising by giving advertisers instant feedback on campaigns.
Consequently, advertisers are able to deliver targeted messages in a more
cost-effective manner. Forrester Research projects that the value of online
advertising will increase from approximately $2.8 billion in 1999 to
approximately $22.2 billion in 2004. Only a small fraction of the
approximately $5.0 billion of real estate and home-related advertising
spending is currently online.
THE MOVE.COM GROUP OPPORTUNITY
The marketplace for relocation, real estate and home-related
products and services is highly fragmented. For most consumers, the
traditional home-finding and relocation process involves locating,
selecting and coordinating multiple product and service providers.
Consequently, the process of moving and settling into a new home is often
one of the most stressful events in a person's life. Moving often leads to
significant lifestyle changes, including new schools, banks, grocers,
cleaners, utility providers and other retail and service relationships.
Move.com Group estimates that the average U.S. homeowner moves every seven
to eleven years, while the average renter moves every 20 to 24 months. A
company that can provide a comprehensive array of dependable, quality
content and services that meets consumers' relocation, real estate and
home-related needs has an opportunity to develop long-lasting relationships
with both consumers and business providers and generate significant repeat
business.
THE MOVE.COM GROUP SOLUTION
BENEFITS TO CONSUMERS. Move.com Group provides valuable
"friend-in-need" services to assist consumers during all stages of the
relocation process and serves as a single source for quality content and
services. Move.com Group also provides products and services to enhance the
attractiveness and enjoyment of consumers' homes. The following chart
outlines Move.com Group's principal relocation, real estate and
home-related content and services.
<TABLE>
<CAPTION>
PLANNING RENTING BUYING SELLING MOVING LIVING
------------ ------------ ------------ ------------ ------------- ------------
- ------------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Neighborhood Apartment Home Brokers/ Moving Home
Information Listings Listings Agents Advice Maintenance
Directory Checklist
Budgeting Temporary/ Finance Moving
Tools Corporate Guide Selling Supplies Home
Housing Guide Furnishings
Moving Facilities Mortgage Van Lines and
Planner Rates Show and Sell Decoration
Senior Monitor Checklist Truck
Rent vs. Buy Housing Rentals Hardware
Analysis Facilities Mortgage
Pre- Self Storage Home
CONTENT AND Mortgage Self Storage qualification, Facilities Improvement
SERVICES Calculator Facilities Application
and Connection/ Insurance
Job Listings Vacation Pre-Approval Disconnection
Rentals Services for Books
Utilities,
Rental Guide Telephone and Auto Center
Newspapers
Child Care
Change of Guide and
Address Search
Vehicle and
Voter
Registration
- ------------- --------------------------------------------------------------------------------
</TABLE>
BENEFITS TO REAL ESTATE BROKERS AND AGENTS. Real estate brokers and
agents play a critical role in the residential real estate marketplace by
facilitating transactions between home buyers and sellers. By providing
consumers planning, budgeting and listings information, Move.com Group
expects to increase the productivity and effectiveness of real estate
professionals. Consumers who visit the move.com network and consult the
available tools and property data become better informed and prepared for
the home buying/selling process. As a result, real estate professionals
enjoy efficiency benefits by interacting with consumers who are more
focused and knowledgeable about their options and opportunities. Real
estate professionals are able to avoid showing prospective buyers
unsuitable homes and can spend less time sharing neighborhood information.
In addition, Move.com Group expects to serve as an attractive marketing
channel and a significant source of customers for real estate professionals
who are trying to reach and service qualified homebuyers and motivated
sellers.
BENEFITS TO RENTAL PROPERTY MANAGERS AND OWNERS. The move.com
network serves as a powerful lead generator and enhances the
cost-effectiveness of the marketing efforts of rental property managers and
owners. Move.com Group delivers these benefits by virtue of its appeal to a
highly targeted audience and national reach to out- of-town movers that
local guides do not provide. In 1999, Move.com Group generated over 2.1
million leads to apartment managers and owners at a significantly lower
cost-per-lease, or CPL, compared to traditional print advertising. Move.com
Group estimates that during 1999, clients who advertised their properties
on Rent Net had an average CPL of approximately $90 versus the national
average CPL of approximately $300 for alternative advertising sources such
as apartment guide publications.
BENEFITS TO BUSINESS PARTNERS. Because the move.com network
attracts consumers when they are focused on making relocation and
home-related purchases and decisions, Move.com Group's business partners,
which sell relocation and home-related products and services, are able to
efficiently reach prospective customers. In addition, these providers can
take advantage of interactive marketing technology used by Move.com Group
to more effectively target their message to this audience. Move.com Group
develops relationships with quality-oriented business partners by providing
them access to a highly targeted and valued group of consumers across
multiple distribution channels, including, CENTURY21(R), COLDWELL BANKER(R)
and ERA(R) real estate agents and brokers operating through offices across
the United States and Canada, Welcome Wagon's direct mail solicitations and
National Home Connections' toll-free customer service center.
MOVE.COM GROUP'S STRATEGY
Move.com Group intends to achieve its objective of becoming the
leading provider of quality online relocation, real estate and home-related
products and services through the following strategic initiatives:
DEVELOP BRAND AWARENESS
Move.com Group will aggressively market the move.com network
through significant online and offline advertising campaigns, as well as
promotions by Cendant Group's leading real estate franchise systems and
Welcome Wagon. Move.com Group expects its offline media advertising
campaign to include print media, radio spots, television commercials,
direct marketing, affiliate programs, co-branding partnerships, grass roots
programs, as well as aggressive public relations efforts. Move.com Group
believes that increased brand awareness will help attract additional
traffic, business partners and talented employees.
On the Internet, Move.com Group currently has strategic
distribution relationships with a number of partners including, among
others, AltaVista, America Online, Yahoo!, Excite, Lycos, GO Network and
Ask Jeeves and expects to add others over time. Move.com Group also will
promote move.com on all of the Web sites in the move.com network. This
promotion will include co-branded interfaces with move.com links from each
of Cendant Group's real estate franchise systems' Web sites and
welcomewagon.com through common navigation tabs.
Move.com Group will also participate in the advertising efforts of
Cendant Group's CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real estate
franchise systems to build and promote move.com as a destination Web site
for relocation, real estate and home-related products and services. The
move.com network will be promoted in the national advertising campaigns and
by real estate professionals of these franchise systems. In 1999, the
CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real estate franchise systems
had nearly 12,000 offices, employing over 200,000 sales associates across
the United States and Canada and spent more than $80 million for national
advertising.
INCREASE PRODUCT AND SERVICE OFFERINGS TO GROW USER BASE AND IMPROVE THE
CONSUMER EXPERIENCE
Move.com Group intends to increase traffic to the move.com network
by continually adding to its quality content and services and establish
itself as a single source for satisfying consumers' relocation, real estate
and home- related product and service needs. Move.com Group expects to
develop and maintain long-term relationships with consumers by expanding
its content and services and delivering an increasingly integrated and
satisfying consumer experience. Move.com Group also will strive to improve
the quality of the consumer experience by establishing quality thresholds,
conducting ongoing research and obtaining users' feedback on the content
and services and the performance of the move.com network.
DEVELOP STRONG RELATIONSHIPS WITH CONSUMERS BY PROVIDING PERSONALIZED,
TARGETED CONTENT AND SERVICES
Move.com Group will tailor content and services offered on the
move.com network to the needs and interests of individual users by
personalizing each visit on a real-time basis through the use of technology
supplied by BroadVision, Inc. BroadVision's technology allows Move.com
Group to organize dynamic profiles of potential and existing customers from
volunteered data, feedback and observed behavior, deliver highly
specialized content and services based on these profiles and securely
execute transactions. By using this technology, Move.com Group expects to
maximize customer satisfaction and retention and streamline and enhance the
interaction between its users and business partners.
EXPAND AND ENHANCE RELATIONSHIPS WITH REAL ESTATE PROFESSIONALS AND
QUALITY-ORIENTED BUSINESS PARTNERS
REAL ESTATE BROKERS AND AGENTS. Move.com Group believes that real
estate brokers and agents serve a critical role in consummating real estate
transactions by facilitating transactions between buyers and sellers. As a
result, Move.com Group intends to develop various programs to increase the
productivity of brokers and agents.
For example, inquiries from consumers about specific home listings
will be automatically transferred to a fax or e-mail and delivered from
Move.com Group to the appropriate real estate broker or agent within about
60 seconds. A well-trained client relations team is responsible for
providing ongoing education to brokers and agents including guidance on how
best to follow up on leads and properly maintain and update listings.
Because the Internet represents a new marketing medium for the real estate
industry, creating and sharing knowledge about how to optimize its use
should be highly valued by brokers and agents. Move.com Group also will
provide brokers and agents with tools to strengthen their Internet
marketing, including enhancements to their listings. By providing all of
these services, Move.com Group expects to receive favorable word-of-mouth
and referrals to the move.com network.
RENTAL PROPERTY MANAGERS AND OWNERS. Move.com Group has numerous
programs to help onsite property managers increase their productivity. For
example, inquiries from the move.com network are delivered to rental
property managers via branded e-mails, faxes or toll-free calls that
identify each lead as originating from the move.com network. In addition, a
highly-trained customer service field force provides frequent educational
seminars and one-on-one sessions for property managers on topics such as
the best ways to follow up on leads and maintain accurate listing
information.
BUSINESS PARTNERS. Move.com Group intends to increase and
strengthen its relationships with quality-oriented business partners by
aggressively marketing the benefits of affiliation with the move.com
network. In addition to providing its business partners access to a highly
targeted group of consumers, Move.com Group will implement sophisticated
lead-delivery and tracking mechanisms to maximize its business partners'
marketing efforts. Move.com Group believes strongly in establishing
mutually beneficial relationships with dependable business partners that
will generate traffic and revenue for both parties. Move.com Group is
currently negotiating with a number of potential business partners to
expand its service and product offerings to continue to assist movers,
homeowners and renters before, during and long after their move. In
addition, Move.com Group expects to generate significant advertising client
leads by leveraging Cendant's extensive business-to-business marketing
relationships with over 100 major vendor corporations. Cendant's preferred
alliance group, which manages these relationships, will work closely with
Move.com Group to market the advertising opportunities on the move.com
network.
PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS, INCLUDING INTERNATIONAL
OPPORTUNITIES
Move.com Group will continue to form strategic alliances with key
Internet sites to increase brand awareness, traffic and revenue. In
addition, Move.com Group will pursue acquisitions and partnerships both in
the United States and selected international markets that can provide
complementary capabilities, additional content and services, technical
personnel, established consumer relationships and online traffic.
MOVE.COM NETWORK
The move.com network is comprised of the following Web sites that
offer quality relocation, real estate and home-related content and
services.
MOVE.COM. Move.com is Move.com Group's Internet portal and flagship
site. Move.com is dedicated to providing consumers a one-stop solution for
their relocation, real estate and home-related needs before, during and
after a move. Move.com combines home and rental housing listings, mortgage
services and numerous moving and home- related services to help make moves
easier, less stressful, more efficient and enjoyable. Move.com offers
content and services through planning, renting, buying, selling, moving and
living site tabs.
RENT.NET. Rent Net is a leading online rental and relocation guide
and advertising source for the apartment industry, representing properties
and relocation services in more than 3,000 cities across North America.
Rent Net's paying advertising clients include managers and owners of over
13,000 apartment communities representing over 3 million apartment units in
all 50 states and Canada. Rent Net provides rental listings containing
detailed property descriptions, photographs, floor plans, 360(0) virtual
tours, and direct communication links to rental property managers.
According to Media Metrix, Rent Net was the most visited Web site for real
estate rental listings, based on unique visitors, during 1999, including
December 1999, the most recently measured period.
SENIORHOUSING.NET. Senior Housing Net provides the move.com network
with a directory of over 750 retirement communities, assisted living
facilities and nursing homes containing detailed property descriptions,
photographs, floor plans, 360(0) virtual tours and direct communication
links to onsite managers.
CORPORATEHOUSING.NET. Corporate Housing Net is the leading online
directory and advertising source for the temporary/corporate housing
industry, with over 400 local and national listing providers across the
United States and Canada. Through Corporate Housing Net, users are able to
access detailed property information, including photos, floor plans and
available amenities, and may contact leasing agents via e-mail, fax or
phone.
SELFSTORAGE.NET. Self Storage Net is the leading online directory
and advertising source for the self storage industry, with listings for
over 3,000 storage facilities across the United States and Canada. Through
Self Storage Net, users are able to access descriptions of facilities
photos and maps, as well as direct communication links to facility owners
or managers.
CENTURY21.COM. Century21.com is the official Web site for the
CENTURY21(R) real estate franchise system. The CENTURY21(R) franchise
system is comprised of over 6,300 independently owned and operated offices
with approximately 110,000 brokers and agents worldwide, in more than 25
countries and territories. The CENTURY21(R) franchise system provides the
move.com network with home listings and brand exposure. Move.com Group
manages the Web site's maintenance and technical support and acts as an
advertising placement agent.
COLDWELLBANKER.COM. Coldwellbanker.com is the official Web site for
the COLDWELL BANKER(R) real estate franchise system. The COLDWELL BANKER(R)
franchise system has nearly 3,000 independently owned and operated real
estate offices with more than 70,000 sales associates throughout the United
States, Canada, Mexico, Central America, the Caribbean, Israel and
Singapore. The COLDWELL BANKER(R) franchise system provides the move.com
network with listings of residential and vacation properties and brand
exposure. Move.com Group manages the Web site's maintenance and technical
support and acts as an advertising placement agent.
ERA.COM. Era.com is the official Web site for the ERA(R) real
estate franchise system. The ERA(R) franchise system is comprised of more
than 2,600 independently owned and operated offices with approximately
29,000 sales associates worldwide. The ERA(R) franchise system provides the
move.com network with residential property listings and brand exposure.
Move.com Group manages the Web site's maintenance and technical support and
acts as an advertising placement agent.
WELCOMEWAGON.COM. Welcomewagon.com is the official Web site of
Welcome Wagon/Getko. Welcomewagon.com provides the move.com network with
local community information, including a directory of more than 40,000
local merchants and service providers nationwide.
CONSUMER SERVICES
PLANNING. The move.com network provides a broad range of content
and tools to assist consumers in the complex decisions and tasks involved
in the moving process. Planning tools available on the move.com network
include a moving planner that describes the numerous tasks that a consumer
should complete before he or she moves. In addition, consumers can use
budgeting and analysis tools to help determine what they are able to afford
and whether they should buy or rent. Consumers also can get neighborhood
information, including data on schools, crime, climate, cost of living and
other demographic information covering all 50 states and 95% of all zip
codes in the United States.
RENTING. Users of the move.com network have access to a
comprehensive rental guide to apartments, senior housing,
temporary/corporate housing, self storage facilities and vacation rentals.
Move.com Group offers consumers a significantly better way to find a rental
property that combines a fast and easy searching experience with content,
tools and personalization features to make finding a property less onerous
and more manageable. Move.com Group publishes rental housing listings from
all 50 states, Canada and 40 other countries. These listings are frequently
updated and can be searched and sorted based on users' criteria. For
example, a user looking for an apartment can choose a city and state, then
narrow the search by number of bedrooms and monthly rent and then sort the
results according to various criteria. A user can then get detailed
information about the apartment including square footage, amenities offered
and whether pets are allowed. Many of the apartment, temporary/corporate
and senior housing listings include a location map, a floor plan, and
pictures and/or a "360(0) virtual tour" provided through Internet Pictures
Corporation, or IPIX. The "virtual tours" give the potential renter the
opportunity to view an entire room, from floor to ceiling and all the way
around on his or her computer screen.
In addition to detailed listings, Move.com Group offers potential
renters information on tenant rights and gives advice on how to improve
relationships with a landlord or neighbor.
BUYING. The move.com network serves as a one-stop destination for
valuable services and tools to assist consumers in the home-buying and
financing process. Consumers can begin by consulting a checklist that
breaks down this complicated process into discrete stages or directly
access relevant content and other tools, including listings and financing
services.
Through 40-year agreements with Cendant, Move.com Group provides a
national directory of listings of homes for sale from CENTURY21(R),
COLDWELL BANKER(R) and ERA(R), three of the five largest residential real
estate franchise systems in the world. Users can search and sort these
listings based on specified criteria. Users also may subscribe to an e-mail
service that provides weekly updates of new listings. Home listings on
move.com are updated daily after a broker or agent updates his or her
listings. Move.com also offers users access to a national directory of
brokers and agents and information to help consumers identify quality real
estate professionals through either a targeted search, or a link to a
particular broker's or agent's home page.
Move.com Group offers mortgage origination, refinancing and
mortgage-related tools and content through Cendant Mortgage, the
sixth-largest retail mortgage originator in the United States with
approximately $26 billion in mortgage originations in 1999. Visitors to the
move.com network can research, apply for, monitor, receive and service
mortgage loans online. After submitting an application, users can track
their loan status online at anytime. Prospective borrowers also can
interact with customer service representatives either by e-mail or
telephone to check the status of their loans or lock-in interest rates. In
addition to getting a new mortgage, Move.com Group offers consumers
analytical tools to help them decide whether they can benefit from
refinancing their existing mortgage. Move.com Group provides information
and analysis of the goals, advantages and costs of refinancing.
Furthermore, users can sign up for a service that sends automatic e-mail
updates of loan rates, allowing them to conveniently monitor interest rate
movements.
SELLING. Move.com Group provides various tools and information to
help homesellers. For example, consumers can consult a selling guide that
answers many frequently asked questions and provides useful data on
neighborhoods and home values, as well as tips on how to increase a home's
resale value. Consumers also can connect with a real estate professional to
assist them in maximizing the return on their home investment.
MOVING. By leveraging the expertise and experience of Cendant
Mobility, the largest provider of corporate employee relocation services in
the world, Move.com Group provides consumers with valuable information,
tools and insight to successfully navigate the moving process. For example,
Move.com Group's moving day countdown calendar allows users to plan and
track each step of the moving process from packing to settling into the new
home. In addition, Move.com Group's business partners provide users access
to packing, shipping, storage, trucking, insurance and other moving-related
products and services. Users also have access to critical disconnection and
connection services through National Home Connections, which permit them to
conveniently change, at no cost, their utilities and cable providers,
newspaper subscriptions, mailing address and vehicle and voter
registration.
LIVING. Move.com Group offers a variety of valuable resources to
meet consumers' furnishing, decorating, parenting, home improvement and
other home-related needs. Through various quality-oriented business
partners, Move.com Group offers consumers the opportunity to connect with
providers of furniture, childcare, home improvement and other home-related
products and services, such as Furniture.com, Carefinder.com, ImproveNet
and Hardware.com. In addition, Move.com Group assists consumers in their
integration into a new community by providing links to Welcome Wagon's
discount offers from local merchants across the United States and Canada.
BUSINESS SERVICES
Move.com Group provides a variety of value-added products and
services for its business partners, who are trying to reach Move.com
Group's highly targeted and valued user base.
BROKERS AND AGENTS. Move.com Group will offer various products and
services to help increase productivity and effectiveness to the real estate
professionals of the CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) franchise
systems. These products and services include listing enhancements and
helpful advice on ways to most effectively follow up on e-leads.
Move.com Group expects to offer brokers and agents several
fee-based listing enhancement options, which can provide an economical
method for brokers and agents to attract qualified homebuyers and motivated
sellers. While a recent survey shows that most top-producing real estate
brokers and agents spend between $300 and $900 on marketing per
transaction, Move.com Group intends to reduce this cost significantly for
professionals who utilize enhanced listings.
RENTAL PROPERTY MANAGERS AND OWNERS. Move.com Group offers services
to managers and owners of apartments, self storage, senior housing and
temporary/corporate housing facilities in all 50 states and Canada. These
fee-based services include a variety of listing enhancements such as
prominent placement, unlimited text descriptions, color photos and virtual
tours. In its largest category of apartments, Move.com Group historically
has targeted the estimated 25,000 large apartment communities that have
ongoing listing needs and spend money on advertising. Through its recent
acquisition of MetroRent, Move.com Group has begun to target apartment
buildings with 25 or fewer units. Move.com Group also targets managers and
owners of 50,000 senior housing facilities, 1,000 temporary/corporate
housing properties and 30,000 self storage facilities.
Move.com Group places a substantial emphasis on maintaining its
existing base of rental property clients and services each of them on a
regular basis. Most rental property clients are assigned a field
representative who is responsible for helping them take full advantage of
the marketing power of the Internet and is capable of answering their
questions and updating their listings on a timely basis. Each year since
1995, Move.com Group has retained over 90% of its rental property client
base. Move.com Group believes that this high retention rate is a good
indicator of the value of the services it provides rental property managers
and owners and the satisfaction and results it delivers.
Currently, Move.com Group's rental property paying clients include
managers and owners of over 13,000 apartment communities representing over
3 million apartment units in all 50 states and Canada, over 750 senior
housing facilities in all 50 states, over 400 temporary/corporate housing
companies worldwide and over 3,000 self storage facilities in 47 states and
Canada.
ADVERTISING CLIENTS AND SPONSORS. Move.com Group offers businesses
the ability to reach users through traditional banner advertisements and/or
through sponsorship arrangements. Advertising clients and sponsors can
purchase placements with direct links to their sites on various content
areas of move.com or across the entire move.com network. In addition,
companies can enter into sponsorship arrangements with Move.com Group to
allow users of the move.com network to link directly to the sponsors' sites
by featuring "fixed buttons" or other prominent placements. Move.com Group
sells advertisements and sponsorships typically for a fixed fee either paid
up-front or monthly and/or fees based on e-commerce transactions generated
through leads provided by the move.com network.
Move.com Group's principal advertisers and sponsors are listed:
MOVE.COM GROUP
ADVERTISING CLIENTS AND SPONSORS
o hardware.com o CarsDirect.com, Inc.
o Carefinder.com, Inc. o Ryder TRS Inc.
o ImproveNet, Inc. o Allstate Corporation
o Furniture.com, Inc. o CORT Furniture Rental
o Internet Pictures Corporation (IPIX) o barnesandnoble.com llc
WELCOME WAGON CLIENTS. Move.com Group will provide online marketing
services for a fee to Welcome Wagon, a premier direct marketer for over
40,000 local merchants. Registered users of move.com, who visit the Welcome
Wagon section of move.com, will be able to view and download discount
offers from local merchants.
PERSONALIZED RELATIONSHIP MANAGEMENT. Move.com Group utilizes the
BroadVision One-to-One Enterprise software, which permits customizing the
site's content to the expressed needs and interests of individual users
during each visit on a real-time basis. By interactively capturing users'
profiles and organizing and targeting content to each user, move.com
maximizes utility for both consumers and Move.com Group's business
partners. Consumers are directed to desired products or services, while
business partners who provide the particular products or services are able
to access the most likely buyers of their products and services. Move.com
Group's privacy policy prohibits the distribution of a consumer's personal
information without his or her consent.
SALES AND MARKETING
Move.com Group's sales and marketing efforts are directed toward
building brand awareness, increasing online traffic and expanding the
number of business partners.
PURSUE AGGRESSIVE CONSUMER MARKETING STRATEGY. Move.com Group will
focus on aggressively increasing its user base by building its brand into a
widely recognized and accepted consumer name. Move.com Group draws upon
Rent Net's pioneering experience, that goes back to 1995, in building Rent
Net, through online distribution partnerships, into the most visited Web
site for real estate rental listings. Move.com Group will increase brand
awareness by expanding existing and formulating new marketing efforts
through both online promotions and traditional media such as television,
radio and printed publications nationwide.
On the Internet, Move.com Group already has relationships with many
leading online distribution partners, such as AltaVista, America Online,
Yahoo!, Excite, Lycos, the GO Network and Ask Jeeves. With AltaVista, in
particular, Move.com Group has an agreement to serve as an exclusive real
estate content provider to the new AltaVista Real Estate Channel. As part
of the agreement, AltaVista will also promote this co-branded channel and
the move.com network throughout its high traffic network of sites including
AltaVista Search, altavistashopping.com and AltaVista Live!
LEVERAGE CENDANT'S REAL ESTATE BRANDS' ADVERTISING CAMPAIGNS AND
ONLINE TRAFFIC. Move.com Group expects to establish a strong, mutually
beneficial relationship with Cendant Group's leading real estate franchise
systems. The multi-million dollar national and local television, radio and
print advertising campaigns for the CENTURY 21(R), COLDWELL BANKER(R) and
ERA(R) real estate franchise systems will continuously promote the move.com
network. Move.com Group will, in turn, promote these franchise systems in
its national marketing campaigns. The franchise systems' brokers and agents
also will promote the move.com network through word-of-mouth. Common
navigation buttons, along with the move.com logo, will be placed toward the
top of each page of the franchise brands' sites and will allow users to
click-through to move.com's home page and other areas of move.com, such as
the mortgage center or moving planner. Moreover, Move.com Group has
implemented common ad server tools in order to effectively sell
advertisements on each of the franchise brands' sites.
CONTINUE TO BUILD AND STRENGTHEN RELATIONSHIPS WITH BUSINESS
PARTNERS. Move.com Group has a dedicated group of 60 trained sales
professionals, throughout the United States, marketing to and servicing
real estate professionals and third-party product and service providers.
Move.com Group has developed effective methods of capturing and retaining
business partners through time-tested processes and superior customer
relations. Move.com Group expects to continue to add significantly to its
sales resources over time.
LEVERAGE CENDANT'S WELCOME WAGON AND PREFERRED ALLIANCE MARKETING
EFFORTS. Move.com Group expects to leverage Cendant's extensive sales
resources associated with Welcome Wagon and the preferred alliance group.
Cendant currently has over 300 Welcome Wagon sales agents nationwide
marketing to local merchants and an established preferred alliance sales
team marketing to major corporations. These sales agents will offer their
customers online exposure on the move.com network and should serve as a
significant source of leads and business partners to Move.com Group.
INFRASTRUCTURE AND TECHNOLOGY
Move.com Group's infrastructure incorporates leading-edge
technologies to deliver a secure, robust and scalable multi-tier
architecture. This architecture includes redundancy and application and
database server tiers, ensuring high availability and scalability. Some of
the Web sites in the move.com network presently have only a limited amount
of redundant facilities or systems.
Move.com Group's application logic is based on
platform-independent, component-based solutions, allowing component systems
to scale to enterprise levels while being distributed over multiple servers
for redundancy. This high- performance architecture will enable Move.com
Group to deliver a high-quality, secure user experience 24 hours a day,
seven days a week.
Move.com network's sites are primarily hosted in Cendant's Data
Center located in Garden City, New York. The Data Center is a
state-of-the-art facility providing maximum security, production system
monitoring, redundant power, multi-zoned air conditioning, fire
suppression, and redundant, high-bandwidth telecommunications capability.
Back-ups are done on a daily basis and tapes are stored at an offsite
location.
Move.com's infrastructure incorporates leading technologies from
third parties, including:
o BroadVision, Inc.;
o Oracle Corporation;
o VERITAS Software Corporation;
o Rogue Wave Software, Inc.;
o IONA Technologies Plc.;
o Sun Microsystems, Inc.;
o EMC Corporation; and
o Netscape Communications Corporation.
COMPETITION
The market for online relocation and real estate-related services
is relatively new, intensely competitive and rapidly changing. Move.com
Group's success will depend on its ability to continue to provide
comprehensive, timely and useful information to attract and maintain both
consumers and business partners.
Move.com Group believes that the primary competitive factors in
attracting consumers to the move.com network are:
o brand recognition;
o quality, depth, breadth and presentation of content and
services;
o functionality;
o ease-of-use; and
o quality and reliability of service.
Move.com Group believes that the principal competitive factors in
attracting advertisers and content providers to the move.com network are:
o amount of traffic and user demographics;
o quality of service;
o ability to provide targeted audience and quality leads that
become customers;
o cost-effectiveness of advertising on the move.com network; and
o ability to integrate content and purchase opportunities.
Move.com Group's main existing and potential competitors for
consumers and advertisers include:
o Web sites offering home or apartment listings together with
other related services, such as apartments.com,
cyberhomes.com, homehunter.com, homestore.com,
homeseekers.com, homeadvisor.com, iown.com,
newhomenetwork.com and realestate.com;
o online services or Web sites targeting buyers and sellers of
real estate properties and financial services companies,
offering real estate-related products and services;
o general purpose consumer Web sites, search engine providers,
and Web sites maintained by Internet service providers that
offer relocation, real estate or home-related content;
o traditional forms of media such as radio, television,
newspapers and magazines; and
o offline relocation, real estate and home-related product and
service companies.
Move.com Group believes its various competitive advantages,
including its affiliation with Cendant's real estate franchise systems and
its proprietary database and content will permit it to compete favorably
with its competitors. However, many of Move.com Group's existing
competitors, as well as a number of potential new competitors, have greater
name recognition, larger existing consumer bases and significantly greater
financial, technical and marketing resources. Move.com Group may not be
able to compete successfully for consumers, clients and staff and increased
competition could result in price reductions, reduced margins or loss of
market share, any of which could materially adversely affect its business,
results of operations and financial condition.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND DOMAIN NAMES
Move.com Group regards substantial elements of the move.com network
and underlying technology as proprietary and attempts to protect them by
relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure. Despite Move.com Group's precautions, it may be
possible for a third party to copy or otherwise obtain and use Move.com
Group's proprietary information without authorization or to develop similar
technology independently.
Move.com Group intends to apply to register the move.com logo as a
federal trademark. Rent Net is a registered trademark. Other trademarks and
service marks in this prospectus are the property of their holders.
Move.com Group has registered the Internet domain names "Move.com,"
"Rent.Net" and other domain names Move.com Group uses. This gives Move.com
Group the exclusive rights to use these names as the addresses for its Web
sites in the United States. The regulation of domain names is subject to
change. Some proposed changes include the creation of additional top-level
domains in addition to the current top-level domains, such as ".com,"
".net" and ".org." It is also possible that the requirements for holding a
domain name could change. Therefore, Move.com Group may not be able to
obtain or maintain relevant domain names for all of the areas of its
business. It may also be difficult for Move.com Group to prevent third
parties from acquiring domain names that are similar to move.com network's
domain names, that infringe Move.com Group's trademarks or that otherwise
decrease the value of Move.com Group's intellectual property.
Move.com Group may not be able to register "Move.com" and certain
of its trade names as federal trademarks because those names may be generic
or too descriptive to qualify for federal trademark protection.
Accordingly, Move.com Group may not be able to prevent other people from
using those names in their businesses or in such a way as to damage its
reputation, which could ultimately affect its revenue.
Move.com Group currently licenses from third parties technologies
and information incorporated into the move.com network. As Move.com Group
continues to introduce new services that incorporate new technologies and
information, Move.com Group may be required to license additional
technology and information from others.
Legal standards relating to the validity, enforceability and scope
of protection of proprietary rights are uncertain and are still evolving,
especially as they relate to Internet-related rights. In addition, the laws
of some foreign counties may not protect Move.com Group's rights to the
same degree as those of the United States. For these reasons, Move.com
Group cannot be sure that the steps it takes will adequately protect its
proprietary rights. Move.com Group also may be required to litigate to
enforce its intellectual property rights or to determine the validity and
scope of proprietary rights of others. This could create substantial costs
and diversion of management's attention. See "Risk Factors--Move.com Group
relies on intellectual property rights which may not be adequately
protected under current laws."
PRIVACY POLICY
Move.com's privacy policy seeks to give its consumers as much
control as possible over their personal information. Move.com gathers two
types of information about consumers: data that consumers provide through
optional, voluntary registration on the move.com network and data Move.com
Group gathers through aggregated tracking, mainly by tallying page views.
This information enables Move.com Group to tailor its content to consumers'
needs and helps Move.com Group's advertisers understand the demographics of
its audience. Move.com Group does not disclose visitor personal information
to third parties without the visitor's consent.
REGULATION
RESPA requires certain disclosures, including a good faith estimate
of closing costs and fees, as well as mortgage servicing transfer
practices. RESPA also prohibits the payment or receipt of kickbacks or
referral fees, fee shares or splits, or unearned fees in connection with
the provision of real estate settlement services. It is a common practice
for online mortgage and real estate-related companies to enter into
advertising, marketing and distribution arrangements with other Internet
companies and Web sites whereby the mortgage and real estate-related
companies pay fees for advertising, marketing and distribution services and
other goods and facilities based on the number of click- throughs,
completed mortgage loan applications or closed mortgage loans derived from
such arrangements. The applicability of RESPA's referral fee prohibitions
to the compensation provisions of these arrangements is unclear and the
Department of Housing and Urban Development has provided no guidance to
date on the subject. Although Move.com Group believes that it has
structured its relationships with Internet advertisers to ensure compliance
with RESPA, some level of risk is inherent absent amendments to the law or
regulations, or clarification from regulators.
Although Move.com Group's operations on the Internet are not
currently regulated by any government agency in the United States beyond
regulations discussed above and applicable to businesses generally, it is
likely that a number of laws and regulations may be adopted governing the
Internet. In addition, existing laws may be interpreted to apply to the
Internet in ways not currently applied. Regulatory and legal requirements
are subject to change and may become more restrictive, making Move.com
Group's compliance more difficult or expensive or otherwise restricting its
ability to conduct its business as it is now conducted. Such changes could
hurt its business. See "Risk Factors--Increased government regulation and
legal uncertainties relating to the Web could increase Move.com Group's
costs of transmitting data and increase legal and regulatory expenditures
and could decrease client and consumer base."
LEGAL PROCEEDINGS
As of the date of this prospectus, none of the entities in Move.com
Group is a party to any litigation or other legal proceeding that, in
Move.com Group's opinion, could have a material adverse effect on its
business, operating results or financial condition.
For a description of legal proceedings relating to Cendant, see
"Risks Related to Cendant Corporation--Discovery of Accounting
Irregularities and Related Litigation and SEC Investigation."
MOVE.COM GROUP EMPLOYEES
As of January 5, 2000, Move.com Group had 178 full-time employees.
Move.com Group has never had a work stoppage and no personnel is
represented under collective bargaining agreements. Move.com Group believes
that its future success will depend in part on Move.com Group's ability to
attract, integrate, retain and motivate highly qualified personnel, and
upon the continued service of Move.com Group's senior management and key
technical personnel. Competition for qualified personnel in Move.com
Group's industries and geographical locations is intense. Move.com Group
cannot assure you that it will be successful in attracting, integrating,
retaining and motivating a sufficient number of qualified employees to
conduct its business in the future. Move.com Group considers its
relationship with its employees to be satisfactory.
MOVE.COM GROUP FACILITIES
Move.com Group's principal executive and corporate offices and
network operations center are located in San Francisco, California, in
approximately 96,000 square feet of office space under a lease that expires
in 2006. Move.com Group also maintains operations in New York, New York and
Knoxville, Tennessee. Move.com Group believes that its facilities are
adequate for its current operations and that additional space will be
available for future expansion if necessary.
MOVE.COM GROUP MANAGEMENT
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following sets forth information regarding the executive
officers and key employees of Move.com Group:
NAME AGE POSITION
Sarah Nolan.................... 49 Chief Executive Officer and President
Phil Marcus.................... 29 CHIEF STRATEGIC OFFICER/CO-FOUNDER
JED KATZ....................... 29 CHIEF STRATEGIC OFFICER/CO-FOUNDER
BARRY ALLEN.................... 47 CHIEF FINANCIAL OFFICER
BERNIE HAMILTON................ 60 CHIEF QUALITY OFFICER
MARC WEST...................... 40 CHIEF TECHNOLOGY OFFICER
NICOLE VOGEL................... 31 VICE PRESIDENT OF BUSINESS DEVELOPMENT
MICHAEL TCHAO.................. 36 VICE PRESIDENT OF USER EXPERIENCE
SCOTT DEAVER................... 48 VICE PRESIDENT OF MARKETING
ANDREW STRAUS.................. 28 VICE PRESIDENT OF DIRECTORY SERVICES
SARAH NOLAN has been Chief Executive Officer and President of
Move.com Group since September 1999. Prior to joining Move.com Group, Ms.
Nolan was Chairman of the Board and Chief Executive Officer of Narrowline,
an Internet advertising exchange and research company. From May 1997 to
November 1997, Ms. Nolan worked at Hambrecht & Quist LLP, for whom she
served as President and Chief Executive Officer of OptionsLink. From 1986
to 1992, Ms. Nolan worked at American Express as Executive Vice President
of its Travel Related Services division and also served as President of the
AMEX Life Assurance Company. Ms. Nolan has also held positions at Booz
Allen & Hamilton, Irving Trust Company and McGraw-Hill. Ms. Nolan has an
M.B.A. from New York University and a B.A. from Rhodes College.
PHIL MARCUS is a Co-Chief Strategic Officer and a Co-Founder of
Move.com Group. As Chief Strategic Officer, Mr. Marcus, along with Mr.
Katz, concentrates on the high growth opportunities for Move.com Group
including new business initiatives, international expansion and mergers &
acquisitions. Prior to starting Move.com Group, Mr. Marcus was the
President and Co-Founder of Rent Net. In this role, Mr. Marcus oversaw
consumer marketing, software and product development, new business
development, accounting/finance as well as general corporate strategy.
Prior to founding Rent Net, Mr. Marcus was an associate at the law firm of
O'Melveny and Myers and was a tax accountant at Ernst & Young in Los
Angeles. Mr. Marcus holds a Juris Doctorate degree from Hastings College of
the Law and a B.A. in Business-Economics from UCLA.
JED KATZ is a Co-Chief Strategic Officer and a Co-Founder of
Move.com Group. As Chief Strategic Officer, Mr. Katz, along with Mr.
Marcus, concentrates on the high growth opportunities for Move.com Group
including new business initiatives, international expansion and mergers &
acquisitions. Prior to starting Move.com Group, Mr. Katz was the COO and
Co-Founder of Rent Net. In this role, Mr. Katz managed client sales and
marketing, operations and corporate strategy, growing the company from 2 to
160 people. Prior to founding Rent Net in late 1994, Mr. Katz worked in Los
Angeles as an investment manager for Southwest Housing Investments. Prior
to that, Mr. Katz was an apartment manager in Los Angeles. A frequent
speaker on the benefits of online marketing for the real estate industry,
Mr. Katz has also published articles in many of the industry trade
magazines. Mr. Katz has an M.B.A. from The University of California at
Berkeley and a B.A. in Business-Economics from UCLA.
BARRY ALLEN has been Chief Financial Officer of Move.com Group
since December 1999. Prior to joining Move.com Group, Mr. Allen was Chief
Financial Officer of Marketwave Corporation, a provider of enterprise-class
e- business software from June 1998 to September 1999. From 1996 to June
1998, Mr. Allen worked at Cascade Design Automation Corp. as Chief
Financial Officer. From 1990 to 1996, Mr. Allen worked at Celerex Corp. as
Chief Financial and Administrative Officer. Mr. Allen also served as
President and Chief Operating Officer of Air Data Express. Mr. Allen has
also worked at First Columbia Management Corp. and Coopers & Lybrand. Mr.
Allen has a B.A. in business administration from the University of
Washington.
BERNIE HAMILTON has been Chief Quality Officer of Move.com Group
since December 1999. Prior to joining Move.com Group, Mr. Hamilton was
Senior Vice President and General Auditor of the American Express Company
from 1992-1998. Throughout his 25 year career with American Express, Mr.
Hamilton held various positions, primarily in American Express's Travel
Related Services subsidiary. He served as Executive Vice President and
Chief of Staff from 1991-1992, Executive Vice President- Strategic Business
Systems from 1989-1990, President- Latin America and Caribbean Division
from 1979-1989, Vice President and Chief Financial Officer from 1975-1979,
and Director Management Science and Planning from 1973-1974. Mr. Hamilton
also worked as a consultant for Mathematica, Inc. and was a Captain in the
U.S. Army. Mr. Hamilton has a Ph.D. in Business Administration from UCLA,
an M.B.A. from UCLA and a B.S. in Mechanical Engineering Industrial Option
from Notre Dame.
MARC WEST has been Chief Technology Officer of Move.com Group since
February 2000. Prior to joining Move.com Group, Mr. West was Chief
Information Officer of Bluestone Capital TQM Trade.com from 1999 to 2000
where he was responsible for all aspects of technology and e-business
development. Mr. West also served as Vice President, Information Technology
Services for Quick & Reilly/Fleet Securities, Inc. from 1998 to 1999 and
Senior Practice Director for Oracle Corporation from 1995 to 1998. Mr. West
has also held positions with Sequent Computer Systems and MobileOil
Corporation. Mr. West has an M.S. in Human Resources Management from Golden
Gate University and a B.S. in Computer Sciences from the University of
Maryland.
NICOLE VOGEL has been Vice President of Business Development since
July 1999. Prior to joining Move.com Group, Ms. Vogel was Vice President of
Business Development for Turner Interactive Sales, responsible for new
business on the CNN family of Web sites, which include, CNN.com, CNNfn.com
(Financial Network) and CNNSI.com (Sports Illustrated), as well as other
Turner Broadcasting Web sites, such as Cartoon Network.com and WCW.com. As
one of the original five members of the Turner Interactive Sales team, she
oversaw the growth of that division from five to over 50. She was also
responsible for developing many key relationships between CNN and large
Internet entities including staples.com, barnesandnoble.com, Internet
Travel Network, Columbia House and many others. Prior to her
Internet-related duties, Nicole oversaw Corporate Strategic Planning for
Turner's cable sales divisions, and helped engineer the creation of
industry leading analysis and reporting systems for those networks. Ms.
Vogel has a B.A. from American University.
MICHAEL TCHAO has been Vice President of User Experience since
August 1999. Prior to joining Move.com Group, Mr. Tchao ran a technology
marketing strategy consulting practice helping companies develop, launch
and market new technology products and services. His clients included
Fortune 500 companies such as Disney, Hewlett- Packard, IBM and United
Airlines as well as a number of smaller Internet-related startups. Prior to
consulting, Mr. Tchao spent 10 years in various product development and
product marketing positions at Apple Computer developing and launching over
250 hardware and software products. Mr. Tchao has a B.S. in Engineering
Product Design from Stanford University.
SCOTT DEAVER joined Move.com Group as Vice President of Marketing
in September 1999. Prior to joining Move.com Group, Mr. Deaver worked at
Cendant for nine years and held various positions in brand management,
including Vice President Marketing for Ramada and Howard Johnson hotels.
Since 1997 to September 1999, Mr. Deaver served as Senior Vice President
Corporate Marketing where he concentrated on cross-marketing initiatives
for Cendant's business units. Prior to joining Cendant, Mr. Deaver was
Director of Consumer Marketing for Holiday Inns, and was responsible for
the initial marketing launch of Embassy Suites Hotels.
ANDREW STRAUS joined Move.com Group as Vice President of Directory
Services in May 1999. From January 1996 until May 1999, Mr. Straus had been
a Director of Rent Net. Mr. Straus hired, trained and managed Rent Net's
initial sales force and has overseen the growth and development of its
apartment product since its early stages. Today, he oversees both the
residential apartment listings product as well as the other directories
such as Senior Housing Net, Self Storage Net and Rent Net's Corporate
Housing Guide. Mr. Straus is an Advisory Council member of the National
Multihousing Council, a leading organization for owners, developers and
operators of apartment communities. Prior to joining Rent Net, Mr. Straus
was an investment manager for City National Bank of Beverly Hills. He
earned a B.A. degree in Economics from UCLA in 1993.
MOVE.COM GROUP STOCK OPTION PLAN
The following is a brief description of the material features of
the Move.com Group Option Plan. Such description is qualified in its
entirety by reference to the full text of the Option Plan, which we have
filed as an exhibit to the registration statement of which this prospectus
is a part.
The Option Plan provides for grants of options to eligible
employees of Move.com Group and Cendant Group, at the sole discretion of
Cendant's Compensation Committee. A majority of the employees of Move.com
Group will be granted options under the Option Plan. Subject to adjustment
as provided in the Option Plan, the total number of shares of Move.com
stock reserved and available for delivery to optionees is six million
(6,000,000). No optionee may be granted options under the Option Plan
covering more than 50% of the total number of shares of Move.com stock
authorized for issuance under the Option Plan over any consecutive two (2)
year period. Shares subject to an option may be authorized and unissued
shares or may be treasury shares. If any option terminates without being
exercised, the shares of Move.com stock subject to such option will again
be available for option grants under the Option Plan.
The Option Plan will be administered by the Compensation Committee
of the board of directors of Cendant or by such other committee as the
board of directors of Cendant may designate or by the board of directors of
Cendant. The Compensation Committee is authorized, among other things, to
select the employees of Move.com Group and Cendant Group to whom options
will be granted, the number of shares and per share exercise price
applicable thereto, as well as to determine the terms and conditions of
such options. Such selections will be made to advance the goals set forth
above, including to align the interests of the employees of Move.com Group
and Cendant Group employees who support the Move.com Group operations, with
the interests of the stockholders of the Move.com stock. Subject to the
terms and conditions of the Option Plan, the Compensation Committee is
authorized to interpret the Option Plan and adopt administrative rules,
guidelines, policies and practices applicable to the Option Plan, as well
as to make all determinations under the Option Plan.
Options to purchase shares of Move.com stock are the only awards
authorized to be granted under the Option Plan. No option granted under the
Option Plan may qualify as an Incentive Stock Option as defined in Section
422 of the Internal Revenue Code. The exercise price per share applicable
to any option is determined by the Compensation Committee, but may not be
less than the fair market value (as defined in the Option Plan) of a share
of Move.com stock as of the date of grant.
Stock options may be exercisable subject to the terms of the option
agreement, or by such other manner determined by the Compensation
Committee. The Compensation Committee may permit optionees to defer the
receipt of shares issuable in connection with the exercise of any option.
Except as set forth in the Option Plan, options may not be transferred or
otherwise assigned, pledged or encumbered in any way.
All options granted under the Option Plan will be subject to a
vesting schedule established by the Compensation Committee.
The Option Plan provides for the termination of options in the
event that any optionee's employment is terminated for cause (as defined in
the Option Plan). The Option Plan also has provisions for treatment of
outstanding options in the event an optionee terminates employment with
Move.com Group for any other reason.
The Option Plan provides that in the event of a change-of-control
transaction (as defined in the Option Plan), certain options granted
thereunder will become immediately exercisable with respect to 25% of the
unvested portion thereof on a pro rata basis according to the scheduled
vesting dates.
The Option Plan will terminate by its terms on October 29, 2009,
but may be earlier terminated or amended at any time by the board of
directors of Cendant at its sole discretion, except that no such
termination or amendment may impair the rights of any optionee with respect
to any then outstanding options.
Grants of options under the Option Plan are subject to the
discretion of the Compensation Committee and therefore indeterminable.
However, as of the date options have been granted to employees of Cendant
Group and options have been granted to employees of Move.com Group under
the Option Plan.
CERTAIN TRANSACTIONS
After the offering, the relationship between Cendant Corporation
and Move.com Group will be governed by Intercompany Agreements.
Certain wholly-owned subsidiaries of Cendant that are part of
Move.com Group are parties to various long-term agreements with
subsidiaries of Cendant that are part of Cendant Group. These agreements
may be amended at any time upon the mutual agreement of the parties.
RELATIONSHIPS WITH REAL ESTATE FRANCHISORS. On October 1, 1999,
Move.com Operations, Inc., on behalf of Move.com Group, and each of Century
21 Real Estate Corporation, Coldwell Banker Real Estate Corporation and ERA
Franchise Systems, Inc. entered into three separate 40-year Internet
Cooperation Agreements.
Each franchisor has agreed to provide its residential real estate
listings for display on move.com. In addition, each franchisor has agreed
to use commercially reasonable efforts to promote move.com to its brokers
and agents and to provide content for move.com (e.g. information, articles
and promotional material) from its Web site as mutually agreed by the
parties based on a number of factors, including the franchisor cost.
Further, each franchisor has agreed to place move.com identifying marks in
a prominent location on its Web site and, where appropriate, reference
move.com in its television, radio and other offline advertising.
In return, Move.com Group has agreed to display each franchisor's
listings, at no cost, on move.com to provide each franchisor with access to
content developed by Move.com Group, to provide each of CENTURY 21(R) and
COLDWELL BANKER(R) with 50,000, and ERA(R) with 25,000, banner
advertisement impressions per month on move.com, and to provide both broker
profile screens and Internet traffic reports to each franchisor's brokers
and agents and to offer such brokers and agents various ancillary services
developed by Move.com Group.
Move.com Group has been assigned, and has agreed to undertake
management of, the agreements with Web site hosting companies regarding the
maintenance and support of century21.com, coldwellbanker.com and era.com.
In addition, Move.com Group has agreed to serve as a nonexclusive business
development representative for each franchisor, with respect to third party
advertising on century21.com, coldwellbanker.com and era.com. In connection
with this appointment, Move.com Group has the right to place all but 6% of
the advertising on century21.com, coldwellbanker.com and era.com. Move.com
Group is also serving as a nonexclusive advertising placement consultant
for each franchisor, with respect to the placement of each franchisor's
advertising on third party Web sites. Each franchisor has agreed that prior
to appointing any party as agency of record for this service, it will meet
with Move.com Group regarding Move.com Group's potential appointment as an
agency of record.
Move.com Group has also agreed to (1) pay each franchisor 10% of
the revenue received by Move.com Group from the sale of ancillary services
on move.com where the leads are attributable to the brokers or agents of
such franchisor and (2) pay each franchisor 10% of the advertising revenue
received by Move.com Group in connection with advertising placed on each
franchisor's Web site. Each franchisor has agreed to pay to Move.com Group
up to 6% of the value of the Web site management/hosting services rendered
by third parties to such franchisor; however, this amount is only payable
out of any savings realized by such franchisor as a result of Move.com
Group's assumption and management of the third party hosting agreements for
such franchisor's Web site.
Upon the expiration of pre-existing agreements that expire in June
2002, the real estate franchise systems will provide its residential real
estate listings to Move.com Group on an exclusive basis.
RELATIONSHIPS WITH CENDANT MORTGAGE. Move.com Operations, Inc., on
behalf of Move.com Group, is a party to various agreements with Cendant
Mortgage Corporation, a wholly owned subsidiary of Cendant. Pursuant to a
Correspondent Mortgage Services Agreement, Move.com Mortgage, will serve as
an online mortgage broker for residential mortgage products offered by and
through Cendant Mortgage. Move.com Group will receive a fee from Cendant
Mortgage for any leads resulting in closed mortgages. Pursuant to a
Software Development, Licensing and Computerized Loan Origination System
Agreement, Cendant Mortgage will license a customized version of its Web-
based loan origination platform to Move.com Mortgage. Also, pursuant to an
Internet Cooperation Agreement, the parties have agreed to provide various
marketing services, including providing advertising space and links on
move.com to various Cendant Mortgage mortgage programs and products.
INTERCOMPANY SERVICES ARRANGEMENTS. Move.com Operations, Inc., on
behalf of Move.com Group, and Cendant Corporation have entered into an
Intercompany Agreement pursuant to which Cendant Corporation will provide
corporate services to Move.com Group similar to most of the services
provided by Cendant to its other subsidiaries. The services to be provided
will include support for finance functions such as treasury, accounts
payable, payroll and external reporting, human resources-related services
such as benefits administration and recruiting and employee relations
assistance, legal support, and assistance with significant transactions
such as acquisitions. Move.com Group will pay Cendant for such services
with fees to be based on (1) actual costs incurred by Cendant in providing
such services and (2) cost allocation methodologies employed by Cendant for
its other subsidiaries which typically involves an allocation based on a
percentage of revenue. The term of the Intercompany Agreement will be
indefinite, subject to termination upon breach of the agreement or a
divestiture of Move.com Group by Cendant. The agreement can be amended by
mutual agreement of the parties.
RELATIONSHIP WITH GETKO GROUP, INC./WELCOME WAGON. Move.com
Operations, Inc., on behalf of Move.com Group, has entered into an Internet
Cooperation Agreement with Getko Group, Inc., a wholly owned subsidiary of
Cendant which owns the rights to the Welcome Wagon brand name. Under the
agreement, Move.com Operations, Inc. has agreed to develop, host and
maintain the Welcome Wagon area of the move.com Web site for the purpose of
promoting merchant discount offerings and allowing visitors to obtain
coupons to be redeemed with local merchants. Getko has agreed to promote
the Welcome Wagon area of move.com and the services offered on move.com to
its local merchant clients and to maintain agreements with such clients.
Getko will pay Move.com Group commissions based on Getko's net revenue on a
quarterly basis. Getko will pay Move.com Group 25%, 40% and 75% of its net
revenue in 2000, 2001 and 2002, respectively. Move.com Group has agreed to
reimburse Getko for a percentage of its total expenses in promoting
move.com. Move.com Group will pay 30%, 50% and 75% of these expenses in
2000, 2001 and 2002, respectively. The term of the Internet Cooperation
Agreement commenced January 1, 2000 and ends on December 31, 2002 with an
option to renew for one year at Move.com Group's option subject to
termination in the event of a material breach of the agreement or if
Move.com Operations, Inc. is not wholly owned by Cendant.
DEVELOPMENT AND MARKETING AGREEMENT. Move.com Operations, Inc., on
behalf of Move.com Group, and Cendant Group have entered into a Development
and Marketing Agreement pursuant to which Cendant and Move.com Group will
continue to establish preferred alliance marketing arrangements with third
parties for the promotion of such third parties' products and services to
Cendant's home buying customers and Move.com Group's consumers. Move.com
Group and Cendant will each be obligated to appoint appropriate marketing
and relationship management and business personnel, to coordinate and
develop the marketing of third party contracts and to promote and implement
the various services into their respective businesses. Move.com Group will
compensate Cendant on a quarterly basis for its expenses in providing the
services, and Move.com Group and Cendant have agreed to share certain fees
and payments as well as ongoing commissions.
DESCRIPTION OF CAPITAL STOCK
The following description is not complete and should be read with
our certificate of incorporation, as amended and restated which we have
filed as an exhibit to the registration statement of which this prospectus
is a part. See "Illustration of Terms," for further discussion of terms
described in this prospectus.
GENERAL
Our certificate of incorporation, as amended and restated,
authorizes it to issue 2,510,000,000 shares, consisting of 2,000,000,000
shares of CD stock, par value $.01 per share, 500,000,000 shares of
Move.com stock, par value $.01 per share and 10,000,000 shares of preferred
stock, par value $.01 per share. As of January 24, 2000, Cendant had
approximately 704,560,494 shares of common stock and no shares of preferred
stock outstanding.
We have allocated, for financial accounting purposes, all of our
consolidated assets, liabilities, revenue, expenses and cash flow between
Cendant Group and Move.com Group. In the future, we will publish financial
statements of Move.com Group together with consolidated financial
statements of Cendant.
The board of directors of Cendant has designated the initial number
of shares to the public and those which represent Cendant Group's retained
interest in Move.com Group. See "--Cendant Group's Retained Interest in
Move.com Group," "--Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group" and "Illustration of Terms"
for additional information about Cendant Group's retained interest in
Move.com Group and the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group.
The board of directors of Cendant will have the authority to
increase or decrease from time to time the total number of authorized
shares comprising either series of common stock. However, the board of
directors of Cendant may not increase the number of authorized shares of a
series above a number which, when added to all of the authorized shares of
the other series of common stock, would exceed the total authorized number
of shares of common stock. Likewise, the board of directors of Cendant may
not decrease the number of authorized shares of a series below the number
of shares of such series then outstanding.
The board of directors of Cendant will have the authority in its
sole discretion to issue authorized but unissued shares of common stock
from time to time for any proper corporate purpose. The board of directors
of Cendant will have the authority to do so without your approval, except
as provided by Delaware law or the rules and regulations of any securities
exchange on which any series of outstanding common stock may then be
listed.
DIVIDENDS
Move.com Group currently intends to retain all of its earnings to
finance the operation and expansion of its business.
Cendant does not expect to pay any cash dividends on CD stock or
Move.com stock in the foreseeable future. Although we do not expect to pay
dividends on CD stock or Move.com stock for the foreseeable future, we will
be permitted to pay dividends on:
o CD stock out of the lesser of (1) the assets of Cendant
legally available for the payment of dividends under
Delaware law and (2) the available dividend amount for
Cendant Group; and
o Move.com stock (and corresponding amounts to Cendant Group
with respect to its retained interest in Move.com Group) out
of the lesser of (1) the assets of Cendant legally available
for the payment of dividends under Delaware law and (2) the
available dividend amount for Move.com Group.
The available dividend amount for Cendant Group at any time is the
amount that would then be legally available for the payment of dividends on
Cendant Group's common stock under Delaware law if (1) Cendant Group and
Move.com Group were each a separate Delaware corporation, (2) Cendant Group
had outstanding (a) a number of shares of common stock, par value $0.01 per
share, equal to the number of shares of CD stock that are then outstanding
and (b) a number of shares of preferred stock, par value $0.01 per share,
equal to the number of shares of preferred stock of Cendant that have been
attributed to Cendant Group and are then outstanding, (3) the assumptions
about Move.com Group set forth in the next sentence were true and (4)
Cendant Group owned a number of shares of Move.com stock equal to the
number of shares issuable with respect to Cendant Group's retained interest
in Move.com Group. Similarly, the available dividend amount for Move.com
Group at any time is the amount that would then be legally available for
the payment of dividends on Move.com stock under Delaware law if Move.com
Group were a separate Delaware corporation having outstanding (1) a number
of shares of common stock, par value $0.01 per share, equal to the number
of shares of Move.com stock that are then outstanding plus the number of
shares issuable with respect to Cendant Group's retained interest in
Move.com Group and (2) a number of shares of preferred stock, par value
$0.01 per share, equal to the number of shares of preferred stock of
Cendant that have been attributed to Move.com Group and are then
outstanding.
The amount legally available for the payment of dividends on common
stock of a corporation under Delaware law is generally limited to (1) the
total assets of the corporation less its total liabilities less (2) the
aggregate par or stated value of the outstanding shares of its common and
preferred stock. However, if that amount is not greater than zero, the
corporation may also pay dividends out of the net profits for the
corporation for the fiscal year in which the dividend is declared and/or
the preceding fiscal year. As mentioned above, these restrictions will form
the basis for calculating the available dividend amounts for Cendant Group
and Move.com Group. These restrictions will also form the basis for
calculating the aggregate amount of dividends that Cendant as a whole can
pay on its common stock, regardless of series. Thus, net losses of either
business, and any dividends and distributions on, or repurchases of, either
series of common stock, may reduce the assets legally available for
dividends on both series of common stock.
Subject to the foregoing limitations and to any other limitations
set forth in any future series of preferred stock or in any agreements
binding on Cendant from time to time, we have the right to pay dividends on
both, one or neither series of common stock in equal or unequal amounts,
notwithstanding the performance of either Group, the amount of assets
available for dividends on either series, the amount of prior dividends
paid on either series, the respective voting rights of each series or any
other factor.
At the time of any dividend on the outstanding shares of Move.com
stock (including any dividend required as a result of a disposition of all
or substantially all of the assets of Move.com Group, but excluding any
dividend payable in shares of Move.com stock) we will credit to Cendant
Group, and charge against Move.com Group, a corresponding amount in respect
of Cendant Group's retained interest in Move.com Group. Specifically, the
corresponding amount will equal (1) the aggregate amount of such dividend
times (2) a fraction, the numerator of which is the number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group and the denominator of which is the number of shares of Move.com
stock then outstanding. For further examples and illustrations, see
"Illustrations of Terms."
MANDATORY DIVIDEND, REDEMPTION OR EXCHANGE ON DISPOSITION OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF A GROUP
If we dispose of all or substantially all of the assets of a Group
to one or more persons or entities, in one transaction or a series of
related transactions, a "disposition", and the disposition is not an exempt
disposition as defined below, we would be required, by the 85th trading day
after the consummation of such disposition, to choose one of the following
three alternatives:
o declare and pay a dividend to holders of the series of
common stock that relates to that Group (in cash, securities
(other than common stock of Cendant) or other property, or a
combination thereof), in an amount having a fair value equal
to their proportionate interest in the net proceeds of such
disposition;
o redeem from holders of the series of common stock that
relates to that Group, for cash, securities (other than
common stock of Cendant) or other property (or a combination
thereof) in an amount having a fair value equal to their
proportionate interest in the net proceeds of such
disposition, all of the outstanding shares of the relevant
series of common stock (or, if such Group continues after
such disposition to own any material assets other than the
proceeds of such disposition, a number of shares of such
series of common stock having an aggregate average market
value, during the 20 consecutive trading day period
beginning on the 16th trading day immediately following the
date on which the disposition is consummated, equal to such
fair value); or
o issue shares of the series of common stock that does not
relate to that Group in exchange for all of the outstanding
shares of the series of common stock that relates to that
Group at a 10% premium (based on the average market value of
the relevant series of common stock as compared to the
average market value of the other series of common stock
during the 20 consecutive trading day period beginning on
the 16th trading day immediately following the date on which
the disposition is consummated).
There could be substantial benefits or detriments to the holders of
the CD stock or Move.com stock depending upon the alternative selected by
the board of directors for distributing the proceeds of such a sale, and
also depending upon, among other factors: (1) the amount and type of
consideration that Cendant receives in any such disposition, (2) Cendant's
tax basis in the assets disposed of, (3) the tax basis of the holders in
their shares of stock and (4) the market price of the CD stock or Move.com
stock, as applicable. For example, if all or substantially all of the
assets of the Move.com Group are sold and Cendant's tax basis in those
assets is relatively low, the payment of a dividend with respect to, or the
redemption of, Move.com stock will result in the holders of Move.com stock
bearing all of the corporate-level taxes on that sale, while the issuance
of shares of CD stock in exchange for Move.com stock may result in that tax
cost being shared by all of the holders of Cendant's common stock (to the
extent the market price of the Move.com stock does not adjust to fully
account for such taxes). Depending on the market price of the Move.com
stock at the time of such a disposition, the board of directors'
determination to pay a dividend on, or redeem shares of, Move.com stock, as
compared to issuing shares of CD stock in exchange therefor, will result in
more or less value to the holders of such shares. To the extent that the
holders of Move.com stock receive greater value as a result of such a
disposition, the holders of CD stock will own a relatively less valuable
corporation. In addition, depending on the tax basis of a holder in his or
her CD stock or Move.com stock, among other factors, the tax consequences
of an exchange of Move.com stock or CD stock, respectively, for stock of
the other Group (which generally would be tax-free) might be more favorable
than the tax consequences of a dividend on, or redemption of, the Move.com
stock or CD stock, respectively (which generally would be taxable).
In connection with any special dividend on, or redemption of
Move.com stock as described above, we will credit to Cendant Group, and
charge against Move.com Group a corresponding amount in respect of Cendant
Group's retained interest in Move.com Group. Specifically, the
corresponding amount will equal (1) the aggregate fair value of such
dividend or redemption times (2) a fraction, the numerator of which is the
number of shares issuable with respect to Cendant Group's retained interest
in Move.com Group and the denominator of which is the number of shares of
Move.com stock then outstanding. In addition, in connection with any
partial redemption of Move.com stock as described above, we will decrease
the number of shares issuable with respect to Cendant Group's retained
interest in Move.com Group by the same proportion as the proportionate
decrease in outstanding shares of Move.com stock caused by such redemption.
At any time within one year after completing any dividend or
partial redemption of the sort referred to above, we will have the right to
issue shares of the series of common stock that does not relate to the
Group in question in exchange for outstanding shares of the series of
common stock that relates to that Group at a 10% premium (based on the
average market value of the relevant series of common stock as compared to
the average market value of the other series of common stock during the 20
consecutive trading day period ending on the 5th trading day immediately
preceding the date on which Cendant mails the notice of exchange to holders
of the relevant series). In determining whether to effect any such exchange
following such a dividend or partial redemption, we would, in addition to
other matters, consider whether the remaining assets of such Group continue
to constitute a viable business, the number of shares of such common stock
remaining issued and outstanding, the per share market price of such common
stock and the ongoing cost of continuing to have a separate series of such
common stock outstanding.
The following terms used in this document have the meanings
specified in our certificate of incorporation, as amended and restated and
are set forth below:
All or substantially all of the assets of either Group means a
portion of such assets that represents at least 80% of the then-current
fair value of the assets of such Group, which for the Cendant Group
includes the value of its retained interest in Move.com Group.
Cendant Group means (1) all of the businesses, assets and
liabilities of Cendant and its subsidiaries, other than the businesses,
assets and liabilities that are part of the Move.com Group, (2) the rights
and obligations of Cendant Group under any inter-Group debt deemed to be
owed to or by Cendant (as such rights and obligations are defined in
accordance with policies established from time to time by the board of
directors) and (3) a proportionate interest in Move.com Group (after giving
effect to any options, preferred stock, other securities or debt issued or
incurred by Cendant and attributed to Move.com Group) equal to the retained
interest percentage; provided that:
(a) Cendant may reallocate assets from one Group to the
other Group in return for other assets or services rendered by that
other Group in the ordinary course of business or in accordance
with policies established by the board of directors or a committee
thereof from time to time; and
(b) if Cendant transfers cash, other assets or securities to
holders of shares of Move.com stock as a dividend or other
distribution on shares of Move.com stock (other than a dividend or
distribution payable in shares of Move.com stock), or as payment in
a redemption of shares of Move.com stock effected as a result of a
Move.com stock disposition, then the board of directors shall
re-allocate from Move.com Group to Cendant Group cash or other
assets having a fair value equal to the aggregate fair value of the
cash, other assets or securities so transferred times a fraction,
the numerator of which shall equal the number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group
on the record date for such dividend or distribution, or on the
date of such redemption, and the denominator of which shall equal
the number of shares of Move.com stock outstanding on such date.
Move.com Group means (1) the Internet relocation, real estate and
home-related services portal called move.com, including all of the
businesses, assets and liabilities of Cendant and its subsidiaries that the
board of directors has, as of the date on which the amended and restated
certificate of incorporation becomes effective under Delaware law,
allocated to Move.com Group, (2) any assets or liabilities acquired or
incurred by Cendant or any of its subsidiaries after the effective date in
the ordinary course of business and attributable to Move.com Group, (3) any
businesses, assets or liabilities acquired or incurred by Cendant or any of
its subsidiaries after the effective date that the board of directors has
specifically allocated to Move.com Group or that Cendant otherwise
allocates to Move.com Group in accordance with policies established from
time to time by the board of directors, and (4) the rights and obligations
of Move.com Group under any inter-Group debt deemed to be owed to or by
Move.com Group (as such rights and obligations are defined in accordance
with policies established from time to time by the board of directors);
provided that:
(a) Cendant may reallocate assets from one Group to the
other Group in return for other assets or services rendered by that
other Group in the ordinary course of business or in accordance
with policies established by the board of directors from time to
time; and
(b) if Cendant transfers cash, other assets or securities to
holders of shares of Move.com stock as a dividend or other
distribution on shares of Move.com stock (other than a dividend or
distribution payable in shares of Move.com stock), or as payment in
a redemption of shares of Move.com stock effected as a result of a
Move.com stock disposition, then the board of directors shall
re-allocate from Move.com Group to Cendant Group cash or other
assets having a fair value equal to the aggregate fair value of the
cash, other assets or securities so transferred times a fraction,
the numerator of which shall equal the number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group
on the record date for such dividend or distribution, or on the
date of such redemption, and the denominator of which shall equal
the number of shares of Move.com stock outstanding on such date.
An exempt disposition means any of the following:
o a disposition in connection with the liquidation,
dissolution or winding-up of Cendant and the distribution of
assets to stockholders;
o a disposition to any person or entity controlled by Cendant
(as determined by the board of directors in its sole
discretion);
o a disposition by either Group for which Cendant receives
consideration primarily consisting of equity securities
(including, without limitation, capital stock of any kind,
interests in a general or limited partnership, interests in
a limited liability company or debt securities convertible
into or exchangeable for, or options or warrants to acquire,
any of the foregoing, in each case without regard to the
voting power or other management or governance rights
associated therewith) of an entity which is primarily
engaged or proposes to engage primarily in one or more
businesses similar or complementary to businesses conducted
by such Group prior to the disposition, as determined by the
board of directors in its sole discretion;
o a dividend, out of Move.com Group's assets, to holders of
Move.com stock and a transfer of a corresponding amount of
Move.com Group's assets to Cendant Group in respect of its
retained interest in Move.com Group;
o a dividend, out of Cendant Group's assets, to holders of CD
stock; and
o any other disposition, if (1) at the time of the disposition
there are no shares of CD stock outstanding, (2) at the time
of the disposition there are no shares of Move.com stock
outstanding, or (3) before the 30th trading day following
the disposition we have mailed a notice stating that we are
exercising our right to exchange all of the outstanding
shares of CD stock or Move.com stock for newly issued shares
of the other series of common stock as contemplated under
"--Optional Exchange of One Series of Common Stock for the
Other Series" below.
The proportionate interest of holders of Move.com stock in the net
proceeds of a Move.com Group disposition (or in the outstanding shares of
common stock of any subsidiaries holding Move.com Group's assets and
liabilities) means the amount of such net proceeds (or the number of such
shares) times the number of shares of Move.com stock outstanding divided by
the total number of notional Move.com shares deemed outstanding. The
proportionate interest of holders of CD stock in the net proceeds of a
Cendant Group disposition (or in the outstanding shares of common stock of
any subsidiaries holding Cendant Group's assets and liabilities) means the
amount of such net proceeds (or the number of such shares) times the number
of shares of Move.com shares issuable with respect to Cendant Group's
retained interest in Move.com Group divided by the total number of notional
Move.com shares deemed outstanding. For an example and illustration, see
"Illustration of Terms".
The total number of notional Move.com shares deemed outstanding at
any time means the number of shares of Move.com stock then outstanding plus
the number of shares then issuable with respect to Cendant Group's retained
interest in Move.com Group.
OPTIONAL EXCHANGE OF ONE SERIES OF COMMON STOCK FOR THE OTHER SERIES
Prior to the third anniversary of this offering, we will not have
the right to cause the exchange of CD stock for Move.com stock.
From and after the third anniversary of this offering, we will have
the right, at any time after outstanding Move.com stock exceeds 40% of our
total market capitalization, but does not exceed 60% of our total market
capitalization, to issue shares of either series of common stock in
exchange for outstanding shares of the other series of common stock without
a premium. In the event that Move.com stock exceeds 60% of our total market
capitalization, we will lose the right to effect an exchange without a
premium during such period.
The exchange ratio that will result in an exchange without a
premium will be based on the average market value of the series of the
common stock being exchanged as compared to the average market value of the
other series of common stock during the 20 consecutive trading day period
ending on, and including, the 5th trading day immediately preceding the
date on which we mail the notice of exchange to holders of the outstanding
shares being exchanged.
On or after the 18-month anniversary of this offering, we will have
the right to issue shares of CD stock in exchange for outstanding shares of
Move.com stock at a premium. The premium will initially be 20% (for
exchanges occurring prior to the nineteenth month following the initial
issuance of Move.com stock) and will decline ratably each month over an
18-month period to 15%.
In addition, we will have the right, on or after the third
anniversary of this offering, when outstanding Move.com stock exceeds 60%
of our total market capitalization, to issue shares of Move.com stock in
exchange for outstanding shares of CD stock at a 15% premium. In the event
that Move.com stock equals or falls below 60% of our total market
capitalization, we will lose the right to effect such an exchange during
such period.
Cendant believes that providing a 15-20% premium in connection with
the issuance of Move.com stock in exchange for CD stock at a time when a
15-20% premium would be payable upon the issuance of CD stock in exchange
for Move.com stock would present the board of directors of Cendant with an
insurmountable conflict. Because both of these exchanges produce the same
economic, legal and tax result if the premium is not considered, the board
of directors of Cendant would be faced with a tremendous conflict of
interest in deciding which exchange to effectuate given that the class of
stockholders receiving the premium would benefit at the expense of the
other class of stockholders. Accordingly, the exchange provisions were
designed to avoid this conflict and to provide a premium to the smaller
class of stockholders.
The exchange rights incorporated into the Move.com stock and CD
stock were designed to strike an appropriate balance between (1) providing
Cendant with sufficient future financial flexibility and (2) providing
investors in Move.com stock with some degree of certainty that their stock
will not be CD stock in the near future without a premium. The terms that
have been adopted are similar to the terms of other recent issuances of
tracking stock and were selected by the board of directors of Cendant in
consultation with its financial and legal advisors.
Notwithstanding the preceding paragraphs, upon the occurrence of a
tax event, we will have the right to issue shares of CD stock in exchange
for outstanding shares of Move.com stock at a 10% premium regardless of
when such adverse tax law changes take place.
A "tax event" means the receipt by Cendant of an opinion of tax
counsel of Cendant's choice, experienced in such matters, who cannot be an
officer or employee of Cendant or any of its affiliates, to the effect
that, as a result of any amendment to, or change in the laws (or any
regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein (including any proposed change in
such regulations announced by an administrative agency), or as a result of
any official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, it is more likely than
not that for United States federal income tax purposes (1) Cendant, its
subsidiaries or affiliates, or any of its successors or its stockholders
is, or at any time in the future will be, subject to tax upon the issuance
of shares of either CD stock or Move.com stock or (2) either CD stock or
Move.com stock is not, or at any time in the future will not be, treated
solely as stock of Cendant. For purposes of rendering such opinion, the tax
counsel shall assume that any administrative proposals will be adopted as
proposed. However, in the event a change in law is proposed, the tax
counsel shall render an opinion only in the event of enactment.
The exchange ratio that will result in the specified premium will
be calculated based on the average market value of CD stock as compared to
the average market value of Move.com stock during the 20 consecutive
trading day period ending on, and including the fifth trading day
immediately preceding the date on which we mail the notice of exchange to
holders of the outstanding shares being exchanged.
Move.com stock will exceed 40% of the total market capitalization
of Cendant or 60% of the total market capitalization of Cendant, as the
case may be, if the market capitalization of the outstanding Move.com stock
exceeds 40% or 60%, as the case may be, of the total market capitalization
of all classes of common stock of Cendant for 30 trading days during any 60
consecutive trading day period. Thereafter, Move.com stock will fall below
60% of the total market capitalization of Cendant if, after exceeding 40%
of total market capitalization, the market capitalization of the
outstanding Move.com stock falls below 60% of the total market
capitalization of both series of common stock for 30 trading days during
any 60 consecutive trading day period.
OPTIONAL EXCHANGE FOR STOCK OF A SUBSIDIARY
At any time at which all of the assets and liabilities of a Group
(and no other assets or liabilities of Cendant or any subsidiary thereof)
are held directly or indirectly by one or more wholly owned subsidiaries of
Cendant (the "group subsidiaries"), we will have the right to issue to
holders of the relevant series of common stock their proportionate interest
in all of the outstanding shares of the common stock of the group
subsidiaries in exchange for all of the outstanding shares of such series
of common stock.
o If the series of common stock being exchanged is CD stock
and the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group is greater than
zero, we will also issue a number of shares of Move.com
stock equal to the then current number of shares issuable
with respect to Cendant Group's retained interest in
Move.com Group and issue those shares to the holders of CD
stock or to one of the group subsidiaries, at our option.
o If the series of common stock being exchanged is Move.com
stock and the number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group is
greater than zero (so that less than all of the shares of
common stock of the Group subsidiaries are being issued to
the holders of Move.com stock), we may retain the remaining
shares of common stock of the Group subsidiaries or
distribute those shares as a dividend on CD stock.
GENERAL DIVIDEND, EXCHANGE AND REDEMPTION PROVISIONS
If we complete a disposition of all or substantially all of the
assets of a Group (other than an exempt disposition), we would be required,
not later than the 10 trading days after the consummation of such
disposition, to issue a press release specifying (1) the net proceeds of
such disposition, (2) the number of shares of the series of common stock
related to such Group then outstanding, (3) the number of shares of such
series of common stock issuable upon conversion, exchange or exercise of
any convertible or exchangeable securities, options or warrants and the
conversion, exchange or exercise prices thereof and (4) if the Group is
Move.com Group, the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group. Not later than 30 trading days
after such consummation, we would be required to announce by press release
which of the actions specified in the first paragraph under "--Mandatory
Dividend, Redemption or Exchange on Disposition of All or Substantially All
of the Assets of a Group" we have determined to take, and upon making that
announcement, that determination would become irrevocable. In addition, we
would be required, not later than 30 trading days after such consummation
and not earlier than 10 trading days before the applicable payment date,
redemption date or exchange date, to send a notice by first-class mail,
postage prepaid, to holders of the relevant series of common stock at their
addresses as they appear on our transfer books.
o If we determine to pay a special dividend, we would be
required to specify in the notice (1) the record date for
such dividend, (2) the payment date of such dividend (which
can not be more than 85 trading days after such
consummation) and (3) the aggregate amount and type of
property to be paid in such dividend (and the approximate
per share amount thereof).
o If we determine to undertake a redemption, we would be
required to specify in the notice (1) the date of redemption
(which can not be more than 85 trading days after such
consummation), (2) the aggregate amount and type of property
to be paid as a redemption price (and the approximate per
share amount thereof), (3) if less than all shares of the
relevant series of common stock are to be redeemed, the
number of shares to be redeemed and (4) the place or places
where certificates for shares of such series of common
stock, properly endorsed or assigned for transfer (unless we
waive such requirement), should be surrendered in return for
delivery of the cash, securities or other property to be
paid by Cendant in such redemption.
o If we determine to undertake an exchange, we would be
required to specify in the notice (1) the date of exchange
(which can not be more than 85 trading days after such
consummation), (2) the number of shares of the other series
of common stock to be issued in exchange for each
outstanding share of such series of common stock and (3) the
place or places where certificates for shares of such series
of common stock, properly endorsed or assigned for transfer
(unless we waive such requirement), should be surrendered in
return for delivery of the other series of common stock to
be issued by Cendant in such exchange.
If we determine to complete any exchange described under
"--Optional Exchange of One Series of Common Stock for the Other Series" or
"--Optional Exchange for Stock of a Subsidiary," we would be required,
between 10 to 30 trading days before the exchange date, to send a notice by
first-class mail, postage prepaid, to holders of the relevant series of
common stock at their addresses as they appear on our transfer books,
specifying (1) the exchange date and the other terms of the exchange, and
(2) the place or places where certificates for shares of such series of
common stock, properly endorsed or assigned for transfer (unless we waive
such requirement), should be surrendered for delivery of the stock to be
issued or delivered by Cendant in such exchange.
Neither the failure to mail any required notice to any particular
holder nor any defect therein would affect the sufficiency thereof with
respect to any other holder or the validity of any dividend, redemption or
exchange.
If we are redeeming less than all of the outstanding shares of a
series of common stock as described above, we would redeem such shares pro
rata or by lot or by such other method as the board of directors determines
to be equitable.
No holder of shares of a series of common stock being exchanged or
redeemed will be entitled to receive any cash, securities or other property
to be distributed in such exchange or redemption until such holder
surrenders certificates for such shares, properly endorsed or assigned for
transfer, at such place as we specify (unless we waive such requirement).
As soon as practicable after our receipt of certificates for such shares,
we would deliver to the person for whose account such shares were so
surrendered, or to the nominee or nominees of such person, the cash,
securities or other property to which such person is entitled, together
with any fractional payment referred to below, in each case without
interest. If less than all of the shares of common stock represented by any
one certificate were to be exchanged or redeemed, we would also issue and
deliver a new certificate for the shares of such common stock not exchanged
or redeemed.
We would not be required to issue or deliver fractional shares of
any capital stock or any other fractional securities to any holder of
common stock upon any exchange, redemption, dividend or other distribution
described above. If more than one share of common stock were held at the
same time by the same holder, we may aggregate the number of shares of any
capital stock that would be issuable or any other securities that would be
distributable to such holder upon any such exchange, redemption, dividend
or other distribution. If there are fractional shares of any capital stock
or any other fractional securities remaining to be issued or distributed to
any holder, we would, if such fractional shares or securities were not
issued or distributed to such holder, pay cash in respect of such
fractional shares or securities in an amount equal to the fair value
thereof without interest.
From and after the date set for any exchange or redemption, all
rights of a holder of shares of common stock that were exchanged or
redeemed would cease except for the right, upon surrender of the
certificates representing such shares, to receive the cash, securities or
other property for which such shares were exchanged or redeemed, together
with any fractional payment as provided above, in each case without
interest (and, if such holder was a holder of record as of the close of
business on the record date for a dividend not yet paid, the right to
receive such dividend). A holder of shares of common stock being exchanged
would not be entitled to receive any dividend or other distribution with
respect to shares of the other series of common stock until after the
shares being exchanged are surrendered as contemplated above. Upon such
surrender, we would pay to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with
respect to a record date occurring after the exchange, but which were not
paid by reason of the foregoing, with respect to the number of whole shares
of the other series of common stock represented by the certificate or
certificates issued upon such surrender. From and after the date set for
any exchange, we would, however, be entitled to treat the certificates for
shares of common stock being exchanged that were not yet surrendered for
exchange as evidencing the ownership of the number of whole shares of the
other series of common stock for which the shares of such common stock
should have been exchanged, notwithstanding the failure to surrender such
certificates.
We would pay any and all documentary, stamp or similar issue or
transfer taxes that might be payable in respect of the issue or delivery of
any shares of capital stock and/or other securities on any exchange or
redemption described herein. We would not, however, be required to pay any
tax that might be payable in respect of any transfer involved in the issue
or delivery of any shares of capital stock and/or other securities in a
name other than that in which the shares so exchanged or redeemed were
registered, and no such issue or delivery will be made unless and until the
person requesting such issue pays to Cendant the amount of any such tax or
establishes to our satisfaction that such tax has been paid.
We may, subject to applicable law, establish such other rules,
requirements and procedures to facilitate any dividend, redemption or
exchange contemplated as described above as the board of directors may
determine to be appropriate under the circumstances.
VOTING RIGHTS
Currently, holders of existing common stock have one vote per share
on all matters submitted to a vote of stockholders. Holders of CD stock and
Move.com stock will vote together as one class on all matters as to which
common stockholders generally are entitled to vote, unless a separate class
vote is required by applicable law. On all such matters for which no
separate vote is required, each outstanding share of CD stock is entitled
to one vote and each outstanding share of Move.com stock is entitled to one
vote. Each share of CD stock and Move.com stock will continue to have one
vote following a stock split, stock dividend or similar reclassification.
When holders of CD stock and Move.com stock vote together as a
single class, the holders of the series of common stock having a majority
of the votes will be in a position to control the outcome of the vote even
if the matter involves a conflict of interest between the holders of CD
stock and holders of Move.com stock.
The Delaware General Corporation Law requires a separate vote of
holders of shares of common stock of any series on any amendment to the
certificate of incorporation if the amendment would increase or decrease
the par value of the shares of such series or alter or change the powers,
preferences or special rights of the shares of such series so as to affect
them adversely.
We will set forth the number of outstanding shares of CD stock and
Move.com stock in our annual and quarterly reports filed pursuant to the
Securities Exchange Act of 1934, and disclose in any proxy statement for a
stockholder meeting the number of outstanding shares of CD stock and
Move.com stock.
LIQUIDATION
Upon voluntary or involuntary liquidation, dissolution or
winding-up of Cendant, the net assets of Cendant, if any, remaining for
distribution to stockholders (after payment of or provision for all
liabilities, including contingent liabilities, of Cendant and payment of
the liquidation preference payable to any holders of our preferred stock),
will be distributed to the holders of CD stock and Move.com stock pro rata
in accordance with the average market value of a share of CD stock divided
by the average market value of a share of Move.com stock during the 20
consecutive trading day period ending on (and including) the 5th trading
day before the date of the first public announcement of (1) a voluntary
liquidation, dissolution or winding-up by Cendant or (2) the institution of
any proceeding for the involuntary liquidation, dissolution or winding-up
of Cendant.
Neither the merger nor consolidation of Cendant into or with any
other entity, nor a sale, transfer or lease of all or any part of the
assets of Cendant would alone be deemed a liquidation, dissolution or
winding-up for these purposes.
No holder of Move.com stock will have any special right to receive
specific assets of Move.com Group and no holder of CD stock will have any
special right to receive specific assets of Cendant Group upon our
dissolution, liquidation or winding up.
Like other tracking stocks, the liquidation provisions for the CD
stock and Move.com stock do not provide stockholders with proceeds based
directly on the value of the underlying assets and liabilities of each
Group. However, because the market value of each class of stock may
represent the best indirect proxy for the value of each Group, the value
realized by each class of stockholders upon a liquidation of Cendant may
approximate the value such holders would realize if liquidation were based
on the market value of the underlying assets. These liquidation provisions
were adopted for a variety of reasons including (1) providing consistency
with other tracking stock transactions, (2) easing the administrative
burden of allocating proceeds upon liquidation and (3) helping to ensure
classes of stock are treated as Cendant stock for tax purposes.
CENDANT GROUP'S RETAINED INTEREST IN MOVE.COM GROUP
The number of shares of Move.com stock that Cendant may issue for
the account of Cendant Group in respect of its retained interest in
Move.com Group is referred to as the number of shares issuable with respect
to Cendant Group's retained interest in Move.com Group. The board of
directors has designated ______ as the initial number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group.
In this document, we call the percentage interest in Move.com Group
intended to be represented at any time by the outstanding shares of
Move.com stock the outstanding interest percentage, and we call the
remaining percentage interest in Move.com Group intended to be represented
at any time by Cendant Group's retained interest in Move.com Group the
retained interest percentage. At any time, the outstanding interest
percentage equals the number of shares of Move.com stock outstanding
divided by the total number of notional Move.com shares deemed outstanding
(expressed as a percentage) and the retained interest percentage equals the
number of shares issuable with respect to Cendant Group's retained interest
in Move.com Group divided by the total number of notional Move.com shares
deemed outstanding (expressed as a percentage). The sum of the outstanding
interest percentage and the retained interest percentage always equals
100%.
At the time that we file the amended and restated certificate of
incorporation, the retained interest percentage will be 100% and the
outstanding interest percentage will be 0%.
NUMBER OF SHARES ISSUABLE WITH RESPECT TO CENDANT GROUP'S RETAINED INTEREST
IN MOVE.COM GROUP
We currently intend to designate _____ as the initial number of
shares issuable with respect to Cendant Group's retained interest in
Move.com Group. We currently plan to reserve 6,000,000 shares of Move.com
stock for option grants under the Move.com Group Stock Option Plan to
Move.com Group and Cendant Group employees. We intend to attribute the net
proceeds of the exercise of such options to the equity of Move.com Group.
The issuance of shares of Move.com stock upon the exercise of those options
will have no effect on the number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group. Thus, after giving
effect to the grant of those options,
o there would be no shares of Move.com stock outstanding, but
there would be 6,000,000 shares of Move.com stock reserved
for issuance upon the exercise of outstanding options,
o the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group would remain
22,500,000.
o the total number of notional Move.com shares deemed
outstanding would be 22,500,000 but would increase to
28,500,000 if all such options were granted and exercised,
o the outstanding interest percentage would be approximately
21% if all such options were granted and exercised, and
o the retained interest percentage would be approximately 79%
if all such options were granted and exercised.
The outstanding interest percentage will increase as the retained
interest percentage will decrease upon the issuance of Move.com stock.
ATTRIBUTION OF ISSUANCES OF MOVE.COM STOCK
Whenever we decide to issue shares of Move.com stock, or options
therefor, we will determine, in our sole discretion, whether to attribute
that issuance (and the proceeds thereof) to Cendant Group in respect of its
retained interest in Move.com Group (in a manner analogous to a secondary
offering of common stock of a subsidiary owned by a corporate parent) or to
Move.com Group (in a manner analogous to a primary offering of common
stock). If we issue any shares of Move.com stock and attribute that
issuance (and the proceeds thereof) to Cendant Group in respect of its
retained interest in Move.com Group, the number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group would be
reduced by the number of shares so issued, the number of outstanding shares
of Move.com stock would be increased by the same amount, the total number
of notional Move.com shares deemed outstanding would remain unchanged, the
retained interest percentage would be reduced and the outstanding interest
percentage would be correspondingly increased. If we instead attribute that
issuance (and the proceeds thereof) to Move.com Group, the number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group would remain unchanged, the number of outstanding shares of Move.com
stock and the total number of notional Move.com shares deemed outstanding
would be increased by the number of shares so issued, the retained interest
percentage would be reduced and the outstanding interest percentage would
be correspondingly increased.
ISSUANCES OF MOVE.COM STOCK AS DISTRIBUTIONS ON CD STOCK
We reserve the right to issue shares of Move.com stock as a
distribution on CD stock, although we do not currently intend to do so. If
we did so, we would attribute that distribution to Cendant Group in respect
of its retained interest in Move.com Group. As a result, the number of
shares issuable with respect to Cendant Group's retained interest in
Move.com Group would be reduced by the number of shares so distributed, the
number of outstanding shares of Move.com stock would be increased by the
same amount, the total number of notional Move.com shares deemed
outstanding would remain unchanged, the retained interest percentage would
be reduced and the outstanding interest percentage would be correspondingly
increased. If instead we issued shares of Move.com stock as a distribution
on Move.com stock, we would attribute that distribution to Move.com Group,
in which case we would proportionately increase the number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group. As a result, the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group and the total number of
notional Move.com shares deemed outstanding would each be increased by the
same percentage as the number of outstanding shares of Move.com stock is
increased and the retained interest percentage and outstanding interest
percentage would remain unchanged.
DIVIDENDS ON MOVE.COM STOCK
At the time of any dividend on the outstanding shares of Move.com
stock (including any dividend required as a result of a disposition of all
or substantially all of the assets of Move.com Group, but excluding any
dividend payable in Move.com stock), we will credit to Cendant Group, and
charge against Move.com Group a corresponding amount in respect of Cendant
Group's retained interest in Move.com Group. Specifically, the
corresponding amount will equal (1) the aggregate amount of such dividend
times (2) a fraction, the numerator of which is the number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group and the denominator of which is the number of shares of Move.com
stock then outstanding.
REPURCHASES OF MOVE.COM STOCK
If we decide to repurchase shares of Move.com stock, we would
determine, in our sole discretion, whether to attribute that repurchase
(and the cost thereof) to Cendant Group (in a manner analogous to a
purchase of common stock of a subsidiary by a corporate parent) or to
Move.com Group (in a manner analogous to an issuer repurchase). If we
repurchase shares of Move.com stock and attribute that repurchase (and the
cost thereof) to Cendant Group, the number of shares issuable with respect
to Cendant Group's retained interest in Move.com Group would be increased
by the number of shares so purchased, the number of outstanding shares of
Move.com stock would be decreased by the same amount, the total number of
notional Move.com shares deemed outstanding would remain unchanged, the
retained interest percentage would be increased and the outstanding
interest percentage would be correspondingly decreased. If we instead
attribute that repurchase (and the cost thereof) to Move.com Group, the
number of shares issuable with respect to Cendant Group's retained interest
in Move.com Group would remain unchanged, the number of outstanding shares
of Move.com stock and the total number of notional Move.com shares deemed
outstanding would be decreased by the number of shares so repurchased, the
retained interest percentage would be increased and the outstanding
interest percentage would be correspondingly reduced.
TRANSFERS OF CASH OR OTHER PROPERTY BETWEEN CENDANT GROUP AND MOVE.COM GROUP
We may, in our sole discretion, determine to transfer cash or other
property of Move.com Group to Cendant Group in return for a decrease in
Cendant Group's retained interest in Move.com Group (in a manner analogous
to a return of capital) or to transfer cash or other property of Cendant
Group to Move.com Group in return for an increase in Cendant Group's
retained interest in Move.com Group (in a manner analogous to a capital
contribution). If we determine to transfer cash or other property of
Move.com Group to Cendant Group in return for a decrease in Cendant Group's
retained interest in Move.com Group, the number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group and the
total number of notional Move.com shares deemed outstanding would each be
decreased by an amount equal to the fair value of such cash or other
property divided by the market value of a share of Move.com stock on the
day of transfer, the number of outstanding shares of Move.com stock would
remain unchanged, the retained interest percentage would be decreased and
the outstanding interest percentage would be correspondingly increased. If
we instead determine to transfer cash or other property of Cendant Group to
Move.com Group in return for an increase in Cendant Group's retained
interest in Move.com Group, the number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group and the total number of
notional Move.com shares deemed outstanding would each be increased by an
amount equal to the fair value of such cash or other property divided by
the market value of a share of Move.com stock on the day of transfer, the
number of outstanding shares of Move.com stock would remain unchanged, the
retained interest percentage would be increased and the outstanding
interest percentage would be correspondingly decreased.
We may not attribute issuances of Move.com stock to Cendant Group,
transfer cash or other property of Move.com Group to Cendant Group in
return for a decrease in its retained interest in Move.com Group or take
any other action to the extent that doing so would cause the number of
shares issuable with respect to Cendant Group's retained interest in
Move.com Group to decrease below zero. Cendant Group's retained interest
will decrease with each issuance of Move.com stock whether the proceeds of
such issuance are allocated to the Cendant Group (similar to a secondary
offering of securities) or to the Move.com Group (similar to a primary
offering).
For illustrations showing how to calculate the retained interest
percentage, the outstanding interest percentage, the number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group and the total number of notional Move.com shares deemed outstanding
after giving effect to hypothetical dividends, issuances, repurchases and
transfers, see "--Illustration of Terms."
EFFECTIVENESS OF CERTAIN TERMS
The terms described under "--Dividends," "--Mandatory Dividend,
Redemption or Exchange on Disposition of All or Substantially All of the
Assets of a Group," "--Optional Exchange of One Series of Common Stock for
the Other Series," "--Optional Exchange for Stock of a Subsidiary,"
"--Voting Rights" and "--Liquidation" above apply only when there are
shares of both series of common stock outstanding.
DETERMINATIONS BY THE BOARD OF DIRECTORS
The amended and restated certificate of incorporation would provide
that, subject to applicable law, any determinations made by the board of
directors in good faith under the amended and restated certificate of
incorporation or in any certificate of designation filed pursuant thereto
would be final and binding on all stockholders of Cendant.
The board of directors has established a special committee
comprised of directors of Cendant who are not employed by or otherwise
affiliated with either Group. The special committee will address and
resolve, at the request of Cendant's board of directors, any business
issues concerning the relationship between Cendant Group and Move.com
Group.
PREEMPTIVE RIGHTS
Holders of CD stock and Move.com stock will not have any preemptive
rights to subscribe for any additional shares of capital stock or
securities that we may issue in the future.
LIMITATIONS ON POTENTIAL UNSOLICITED ACQUISITIONS; ANTI-TAKEOVER CONSIDERATIONS
If Cendant Group and Move.com Group were separate independent
companies, any person interested in acquiring either Group without
negotiating with management could seek control of that entity by obtaining
control of its outstanding voting stock by means of a tender offer or proxy
contest. Although we intend CD stock and Move.com stock to reflect the
separate performance of Cendant Group and Move.com Group, a person
interested in acquiring only one Group without negotiation with Cendant's
management could obtain control of that Group only by obtaining control of
the outstanding voting stock of Cendant, which includes both CD stock and
Move.com stock.
The existence of two series of common stock could prevent
stockholders from profiting from an increase in the market value of their
shares as a result of a change in control of Cendant by delaying or
preventing such a change in control.
There is an additional 500,000,000 shares of common stock available
for future issuance without further stockholder approval. One of the
effects of the existence of authorized and unissued common stock and
preferred stock could be to enable the board of directors to issue shares
to persons friendly to current management which could render more difficult
or discourage an attempt to obtain control of Cendant by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the
continuity of our management. Such additional shares also could be used to
dilute the stock ownership of persons seeking to obtain control of Cendant.
For additional anti-takeover considerations, see "--Certain Other
Provisions of the Amended and Restated Certificate of Incorporation,
By-laws and Delaware Law."
CERTAIN OTHER PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, BY-LAWS AND DELAWARE LAW
PREFERRED STOCK
The amended and restated certificate of incorporation provides that
the board of directors of Cendant may issue shares of preferred stock in
one or more series from time to time and that the board of directors of
Cendant, without further approval of stockholders, has the authority to fix
by resolution or resolutions the designations and the powers, preferences
and rights, and the qualifications, limitations and restrictions thereof,
of the shares of each series of preferred stock, including without
limitation the dividend rights and terms, conversion rights, voting rights,
liquidation preference, sinking funds and any other rights, preferences,
privileges and restrictions. There are no outstanding shares of preferred
stock and no designated series of preferred stock.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The number of members of the board of directors of Cendant will be
fixed from time to time pursuant to our by- laws but shall not be less than
three. Directors may be removed with or without cause by the affirmative
vote of a majority vote of the stockholders at any annual or special
meeting of the stockholders. Newly created directorship and vacancies
(whether arising through death, resignation, disqualification, removal or
other) may only be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
board of directors of Cendant.
A director elected to fill a vacancy shall serve for the remainder
of his term.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Any action required or permitted to be taken by the stockholders of
Cendant must be duly effected at a duly called annual or special meeting of
such holders and may not be taken by any consent in writing by such
holders. Special meetings of stockholders of Cendant may be called only by
the Chairman of the board of directors of Cendant, the President or the
board of directors of Cendant pursuant to a resolution stating the purpose
or purposes of the special meeting. No business other than that stated in
the notice shall be transacted at any special meeting. These provisions
have the effect of delaying consideration of a stockholder proposal until
the next annual meeting unless a special meeting is called by the Chairman,
President or the board of directors of Cendant for consideration of such
proposal.
ADVANCE NOTICE FOR STOCKHOLDER NOMINATIONS AND PROPOSALS OF NEW BUSINESS
Our by-laws establish an advance notice procedure. This procedure
requires stockholders to deliver to Cendant notice of any proposal to be
presented or of a candidate to be nominated for election as a director of
Cendant not less than 60 nor more than 90 days prior to the date of the
meeting. However, if the date of the meeting is first publicly announced or
disclosed (in a public filing or otherwise) less than 70 days prior to the
date of the meeting, such advance notice shall be given not later than 10
days after such date is first so announced or disclosed. Accordingly,
failure by a stockholder to act in compliance with the notice provisions
will mean that the stockholder will not be able to nominate directors or
propose new business.
AMENDMENTS
The affirmative vote of a majority of the outstanding shares
entitled to vote generally in the election of directors, voting together as
a single class, or a majority of the board of directors of Cendant is
required to amend provisions of our by-laws relating to the advance notice
provisions, stockholder action without a meeting, the calling of special
meetings, the number (or manner of determining the number) of Cendant's
directors, the election and term of Cendant's directors, the filling of
vacancies and the removal of directors.
FAIR PRICE PROVISIONS
Under the Delaware General Corporation Law and the amended and
restated certificate of incorporation, an agreement of merger, sale, lease
or exchange of all or substantially all of Cendant's assets must be
approved by the board of directors of Cendant and adopted by the holders of
a majority of the outstanding shares of stock entitled to vote thereon.
However, the amended and restated certificate of incorporation includes
what generally is referred to as a "fair price provision", which requires
the affirmative vote of the holders of at least 80% of the outstanding
shares of capital stock entitled to vote generally in the election of
Cendant directors, voting together as a single class, to approve business
combination transactions (including mergers, recapitalization and the
issuance or transfer of securities of Cendant or a subsidiary having an
aggregate fair market value of $10 million or more) involving Cendant or a
subsidiary and an owner or any affiliate of an owner of 5% or more of the
outstanding shares of capital stock entitled to vote, unless either (1)
such business combination is approved by a majority of disinterested
directors, or (2) the stockholders receive a "fair price" for their Cendant
securities and other procedural requirements are met. The amended and
restated certificate of incorporation provides that this provision may not
be repealed or amended in any respect except by the affirmative vote of the
holders of not less than 80% of the outstanding shares of capital stock
entitled to vote generally in the election of Cendant's directors.
CERTAIN PROVISIONS OF DELAWARE LAW WHICH MAY INHIBIT CHANGES OF CONTROL
Cendant is subject to the business combination provisions of
Section 203 of the Delaware General Corporation Law. In general, such
provisions prohibit a publicly-held Delaware corporation from engaging in
various business combination transactions with any interested stockholder
for a period of three years after the date of the transaction in which the
person became an interested stockholder unless: (1) the business
combination transaction, or the transaction in which the interested
stockholder became an interested stockholder, is approved by the board of
directors of Cendant prior to the date the interested stockholder obtained
such status, (2) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at
the time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer or (3) on or subsequent to such date the business combination is
approved by the board of directors of Cendant and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least
662/3% of the outstanding voting stock which is not owned by the interested
stockholder. A "business combination" is defined to include mergers, asset
sales and other transactions resulting in financial benefit to a
stockholder. In general, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or, within three years, did
own) 15% or more of a corporation's voting stock. The statute could
prohibit or delay mergers or other takeover or change in control attempts
with respect to Cendant and, accordingly, may discourage attempts to
acquire Cendant.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 102 of the Delaware General Corporation Law authorizes a
Delaware corporation to include a provision in its certificate of
incorporation limiting or eliminating the personal liability of its
directors to the corporation or its stockholders for monetary damages for
breach of the directors' fiduciary duty of care. The duty of care requires
that, when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by such provision,
directors are accountable to corporations or their stockholders for
monetary damages for conduct constituting gross negligence in the exercise
of their duty of care. Although Section 102 of the Delaware General
Corporation Law does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as
injunction or rescission. Cendant's amended and restated certificate of
incorporation and by-laws include provisions which limit or eliminate the
personal liability of Cendant's directors to the fullest extent permitted
by Section 102 of the Delaware General Corporation Law. Consequently, a
director will not be personally liable to Cendant or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for any
breach of the directors' duty of loyalty to Cendant or its stockholders,
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, unlawful payments of dividends or unlawful
stock repurchases, redemptions or other distributions and any transaction
from which the director derived an improper personal benefit.
Cendant's by-laws provide that Cendant will indemnify to the full
extent permitted by law any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer or employee of Cendant or serves or served at the request of
Cendant any other enterprise as a director, officer or employee. Cendant's
by-laws provide that expenses, including attorneys' fees, incurred by any
such person in defending any such action, suit or proceeding will be paid
or reimbursed by Cendant promptly upon receipt by it of an undertaking of
such person to repay such expenses if it shall ultimately be determined
that such person is not entitled to be indemnified by Cendant. The
inclusion of these indemnification provisions in Cendant's by-laws is
intended to enable Cendant to attract qualified persons to serve as
directors and officers who might otherwise be reluctant to do so.
The directors and officers of Cendant are insured under policies of
insurance maintained by Cendant, subject to the limits of such policies,
against losses arising from any claim made against them by reason of being
or having been such officers or directors.
In addition, the limited liability provisions in Cendant's amended
and restated certificate of incorporation and the indemnification
provisions in Cendant's by-laws may discourage stockholders from bringing a
lawsuit against directors for breach of their fiduciary duty (including
breaches resulting from grossly negligent conduct) and may have the effect
of reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might otherwise have
benefitted Cendant and its stockholders. Furthermore, a stockholder's
investment in Cendant may be adversely affected to the extent Cendant pays
the costs of settlement and damage awards against directors and officers of
Cendant pursuant to the indemnification provisions in Cendant's by-laws.
The limited liability provisions in our amended and restated certificate of
incorporation will not limit the liability of directors under federal
securities laws.
Section 203 of the Delaware General Corporation Law, and the
provisions of Cendant's amended and restated certificate of incorporation
and by-laws described above, may make it more difficult for a third party
to acquire or discourage bids for Cendant. Section 203 and these provisions
could have the effect of inhibiting attempts to change the membership of
the board of directors of Cendant.
LISTING
We will apply to have Move.com stock listed on the New York Stock
Exchange under the symbol "MOV".
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the registrar and
transfer agent for the CD stock and Move.com stock.
CASH MANAGEMENT AND ALLOCATION POLICIES
In order to prepare separate financial statements for Move.com
Group, Cendant has allocated all of its consolidated assets, liabilities,
revenue, expenses and cash flow between Cendant Group and Move.com Group.
Thus, the financial statements for Cendant will include separate financial
data for each Group.
The financial statements of Move.com Group reflect the application
of cash management and allocation policies adopted by the board of
directors. These policies are summarized below.
The board of directors may, in its sole discretion, modify, rescind
or add to any of these policies, although it has no present intention to do
so. The decision of the board of directors to modify, rescind or add to any
of these policies would, however, be subject to the board of directors
general fiduciary duties.
Even though Cendant has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between Cendant Group and
Move.com Group, holders of Move.com stock will continue to be common
stockholders of Cendant and, as such, will be subject to all risks
associated with an investment in Cendant and all of its businesses, assets
and liabilities. See "Risk Factors--Risks Relating to Move.com
Stock--Holders of Move.com stock will be common stockholders of Cendant and
will not have any legal rights relating to specific assets of Cendant."
TREASURY ACTIVITIES
Cendant manages most treasury activities on a centralized,
consolidated basis. These activities include the investment of surplus
cash, the issuance, repayment and repurchase of short-term and long-term
debt and the issuance and repurchase of common stock and preferred stock.
Each Group generally remits its cash receipts (other than receipts of
foreign operations or operations that are not wholly owned) to Cendant, and
Cendant generally funds each Group's cash disbursements (other than
disbursements of foreign operations or operations that are not wholly
owned) on a daily basis.
In the historical financial statements of Cendant and Move.com
Group, (1) all external debt and equity transactions (and the proceeds
thereof) were attributed to Cendant Group, (2) whenever Move.com Group held
cash, that cash was transferred to Cendant Group and accounted for as a
return of capital (i.e., as a reduction in Move.com Group's division equity
and Cendant Group's retained interest in Move.com Group) and (3) whenever
Move.com Group had a cash need, that cash need was funded by Cendant Group
and accounted for as a capital contribution (i.e., as an increase in
Move.com Group's division equity and Cendant Group's retained interest in
Move.com Group). Cendant intends to continue these practices until Move.com
stock is first issued. To date, the operations of Move.com Group have been
funded from available cash, and we have not incurred any indebtedness to
finance the operations of Move.com Group. Accordingly, no interest expense
has been or will be reflected in the financial statements of Move.com Group
for any period prior to the date on which Move.com stock is first issued.
After the date on which Move.com stock is first issued:
(1) Cendant will attribute each future incurrence or
issuance of external debt or preferred stock (and the proceeds
thereof) to Cendant Group, unless the board of directors determines
otherwise. The board of directors may, but is not required to
attribute an incurrence or issuance of debt or preferred stock (and
the proceeds thereof) to Move.com Group to the extent that Cendant
incurs or issues the debt or preferred stock for the benefit of
Move.com Group. If Cendant incurs debt to finance Move.com Group
and the debt is allocated to Cendant Group, then Cendant Group
would be treated as increasing its retained interest in Move.com
Group.
(2) Cendant will attribute each future issuance of CD stock
(and the proceeds thereof) to Cendant Group. Cendant may attribute
any future issuance of Move.com stock (and the proceeds thereof) to
Cendant Group in respect of its retained interest in Move.com Group
(in a manner analogous to a secondary offering of common stock of a
subsidiary owned by a corporate parent) or to Move.com Group (in a
manner analogous to a primary offering of common stock). Cendant
may assist any future repurchases Move.com stock to Cendant Group
in respect of its retained interest in Move.com Group. Dividends on
CD stock will be charged against Cendant Group, and dividends on
Move.com stock will be charged against Move.com Group. In addition,
at the time of any dividend on Move.com stock, Cendant will credit
to Cendant Group, and charge against Move.com Group a corresponding
amount per share in respect of Cendant Group's retained interest in
Move.com Group.
(3) Whenever Move.com Group holds cash, Move.com Group will
normally transfer that cash to Cendant Group. Conversely, whenever
Move.com Group has a cash need, Cendant Group will normally fund
that cash need. However, the board of directors will determine, in
its sole discretion, whether to provide any particular funds to
either Group and will not be obligated to do so.
(4) Cendant will account for all cash transfers from one
Group to or for the account of the other Group (other than
transfers in return for assets or services rendered or transfers in
respect of Cendant Group's retained interest that correspond to
dividends paid on Move.com stock), as inter-Group revolving credit
advances unless:
o the board of directors determines that a given
transfer (or type of transfer) should be accounted
for as a long-term loan;
o the board of directors determines that a given
transfer (or type of transfer) should be accounted
for as a capital contribution increasing Cendant
Group's retained interest in Move.com Group; or
o the board of directors determines that a given
transfer (or type of transfer) should be accounted
for as a return of capital reducing Cendant Group's
retained interest in Move.com Group.
There are no specific criteria to determine when Cendant will
account for a cash transfer as a long-term loan, a capital contribution or
a return of capital rather than an inter-Group revolving credit advance.
The board of directors would make such a determination in the
exercise of its business judgment at the time of such transfer, or the
first of such type of transfer, based upon all relevant circumstances.
Factors the board of directors would expect to consider include:
o the current and projected capital structure of each Group;
o the relative levels of internally generated funds of each
Group;
o the financing needs and objectives of the recipient Group;
o the investment objectives of the transferring Group;
o the availability, cost and time associated with alternative
financing sources;
o prevailing interest rates and general economic conditions;
and
o the nature of the assets or operations to be financed.
After this offering, we expect cash transfers used to fund
the day-to-day operations of Move.com Group will be accounted for as
inter-Group revolving credit advances. If, however, Move.com Group were to
acquire substantial assets, including as a result of significant business
acquisitions expected to provide long-term benefits, the board of directors
would likely account for the required cash funding as a combination of
inter-Group revolving credit advance, long-term loan and/or capital
contribution in a manner similar to which Move.com Group would fund such
assets if it were an independent company with financing costs similar to
those of Cendant. Furthermore, the board of directors currently intends to
account for cash transfers in the aggregate such that the short-term
liabilities, long-term liabilities and equity of Move.com Group were
generally proportionate to the short-term liabilities, long-term
liabilities and equity of comparable businesses with financing costs
similar to those of Cendant.
(5) Any cash transfer accounted for as an inter-Group
revolving credit advance may bear interest at the rate at which the
board of directors, in its sole discretion, determines Cendant
could borrow such funds on a revolving credit basis. Although we
currently do not intend to charge interest on inter-Group revolving
credit advances, if the board of directors determines to charge
interest, the financial statements of Move.com Group will not be
comparable for periods prior to and after charging interest on such
credit advances. If interest is charged on inter-Group revolving
credit advances, it will be at a rate which Cendant is required to
pay to borrow funds at that time. Any cash transfer accounted for
as a long-term loan will have interest rate, amortization,
maturity, redemption and other terms that generally reflect the
then prevailing terms on which the board of directors, in its sole
discretion, determines Cendant could borrow such funds.
(6) Any cash transfer from Cendant Group to Move.com Group,
or for Move.com Group's account, accounted for as a capital
contribution, will correspondingly increase Move.com Group's
division equity and Cendant Group's retained interest in Move.com
Group. As a result, the number of shares of Move.com stock that
Cendant may issue for the account of Cendant Group in respect of
its retained interest in Move.com Group which we call the number of
shares issuable with respect to Cendant Group's retained interest
in Move.com Group, will increase by the amount of such capital
contribution divided by the market value of Move.com Group on the
date of transfer.
(7) Any cash transfer from Move.com Group to Cendant Group,
or for Cendant Group's account, accounted for as a return of
capital, will correspondingly reduce Move.com Group's division
equity and Cendant Group's retained interest in Move.com Group. As
a result, the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group will decrease by the
amount of such return of capital divided by the market value of
Move.com stock on the date of transfer.
We will prepare financial statements in accordance with generally
accepted accounting principles, consistently applied, for Move.com Group.
The financial statements of Move.com Group will reflect the financial
condition, results of operations and cash flows of the businesses included
therein.
Move.com Group financial statements will also include allocated
portions of our debt, interest, corporate overhead and costs of
administrative shared services and taxes. Such allocations are based upon
utilization where possible with any remaining overhead allocated based on a
percentage of revenue. We will make these allocations for the purpose of
preparing the financial statements for Move.com Group; however, holders of
CD stock and Move.com stock will continue to be subject to all of the risks
associated with an investment in Cendant and all of its businesses, assets
and liabilities. See "Risk Factors-The value of Move.com stock may suffer
for reasons having nothing to do with the prospects for Move.com."
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Cendant allocates the cost of corporate general and administrative
services and shared services to the Groups generally based on utilization.
Where utilization is not warranted, overhead is typically allocated on a
percentage of revenue basis. These shared services include legal,
accounting (tax and financial), information services, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses. Where determinations based on utilization alone
are impracticable, Cendant uses other methods and criteria that management
believes to be equitable and to provide a reasonable estimate of the cost
attributable to each Group.
TAXES
Income tax expense, which is determined on a consolidated basis, is
allocated to Cendant Group and Move.com Group, and reflected in the
Move.com Group financial statements in accordance with Cendant's tax
allocation policy. The tax allocation policy provides that the financial
statement expense or benefit, as the case may be, will be allocated to
Move.com Group in an amount equal to the difference between (x) the
consolidated income tax expense or benefit of Cendant for financial
statement purposes, and (y) the consolidated income tax expense or benefit
of Cendant for financial statement purposes computed without including the
Move.com Group financial statement pretax income and any other relevant
amounts properly allocable to Move.com Group. If the above computation
results in a positive amount, such amount will be allocated to Move.com
Group as a tax expense. If the above computation results in a negative
amount, such amount will be allocated to Move.com Group as a tax benefit.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States
("U.S.") federal income tax consequences of the purchase, ownership and
disposition of Move.com stock. The following discussion is based on the
Internal Revenue Code of 1986, as amended, Treasury regulations, judicial
decisions and published positions of the IRS, all as in effect on the date
hereof, and all of which are subject to change, possibly with retroactive
effect. This discussion does not address all aspects of U.S. federal income
taxation that may be relevant to a particular shareholder based on such
shareholder's particular circumstances. For example, the following
discussion does not address the U.S. federal income tax consequences of the
purchase, ownership and disposition of Move.com stock to shareholders who
are broker-dealers, insurance companies, tax-exempt organizations,
financial institutions, persons that will hold Move.com stock as a part of
an integrated investment (including a "straddle") comprised of Move.com
stock and one or more other positions or taxpayers whose functional
currency is not the U.S. dollar. The following discussion also does not
address any aspect of state, local or non-U.S. tax laws. Further, this
summary generally applies to you only if you hold your share of Move.com
stock as capital assets (generally, assets held for investment) and does
not consider the tax treatment to you if you hold Move.com stock through a
partnership or other pass-through entity.
YOU SHOULD CONSULT YOUR TAX ADVISOR WITH REGARD TO THE APPLICATION
OF THE U.S. FEDERAL INCOME TAX LAWS TO THE PURCHASE, OWNERSHIP AND
DISPOSITION OF MOVE.COM STOCK TO YOUR PARTICULAR SITUATION, AS WELL AS TO
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS TO
WHICH YOU MAY BE SUBJECT.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
You are a "U.S. holder" for U.S. federal income tax purposes if you are a
beneficial owner of Move.com stock and are:
o a citizen or resident of the U.S.,
o a corporation, or another entity taxable as a corporation,
formed or organized under the laws of the U.S. or any state,
o an estate, the income of which is subject to U.S. federal
income tax without regard to its source; or
o a trust, if a court within the U.S. is able to exercise
primary supervision over its administration and one or more
U.S. persons have the authority to control all of its
substantial decisions.
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, our
counsel, for U.S. federal income tax purposes Move.com stock will be
considered to be common stock of Cendant. Accordingly, for U.S. federal
income tax purposes neither we nor any U.S. holder will recognize any
income, gain or loss as a result of the issuance of Move.com stock.
Additionally, the purchase, ownership and disposition of Move.com stock
will be treated in the same manner as the purchase, ownership and
disposition of CD stock as to all U.S. holders.
However, no ruling will be sought from the IRS regarding the
issuance of Move.com stock. In addition, the IRS has announced that it will
not issue advance rulings on the classification of an instrument that has
certain voting and liquidation rights in an issuing corporation but whose
dividend rights are determined by reference to the earnings of a segregated
portion of the issuing corporation's assets, including assets held by a
subsidiary. Also, there are no court decisions or other authorities bearing
directly on the classification of instruments with characteristics similar
to those of Move.com stock. It is possible, therefore, that the IRS could
assert that the issuance of Move.com stock could result in taxation to us
or could be characterized as stocks other than common stock of Cendant.
Skadden, Arps, Slate, Meagher & Flom LLP is of the opinion that the IRS
would not prevail in such an assertion.
The current Presidential administration's budget proposals released
on February 7, 2000, would, if enacted, require the recognition of gain by
shareholders upon the receipt of tracking stock in a distribution with
respect to stock or in an exchange, and give the Treasury Department the
authority to treat tracking stock as nonstock or as stock of another
entity, as appropriate. The Treasury Department's explanation expresses the
view that the use of tracking stock "is outside the contemplation of" the
Internal Revenue Code and that "no inference regarding the tax treatment of
[such stock] under current law is intended by [the] proposal." Because the
proposal, if enacted, would be effective only for tracking stock issued on
or after the date of enactment, the proposal will likely not affect the
re-classification of existing common stock into CD stock or the issuance of
the Move.com stock in this offering. If, however, the proposal were to
become law, it could affect future issuances of Move.com stock. Under such
circumstances, Cendant might decide to exercise its right to redeem all of
the outstanding shares of Move.com stock for CD stock at a premium, in
order to eliminate any tracking stock from its capital structure. See
"Description of Capital Stock--Optional Exchange of One Series of Common
Stock for the Other Series". We cannot predict whether the proposal will be
enacted by Congress and, if enacted, whether it will be in the form
proposed by the Clinton Administration.
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion summarizes the material U.S. federal
income tax consequences of the purchase, ownership and disposition of
Move.com stock by "non-U.S. holders." You are a "non-U.S. holder" for U.S.
federal income tax purposes if you are not a U.S. holder.
DIVIDENDS
Currently, we do not intend to pay dividends for the foreseeable
future. However, if we do pay dividends, and you are a non-U.S. holder of
Move.com stock, dividends paid to you generally will be subject to
withholding of U.S. federal income tax at a 30% rate or at a lower rate if
so specified in an applicable income tax treaty. If, however, any such
dividends are effectively connected with your conduct of a trade or
business within the U.S. (or to the extent required by an applicable income
tax treaty they are attributable to a permanent establishment that you
maintain in the U.S.), then the dividends generally will not be subject to
withholding tax. Instead, these dividends will be taxed on a net income
basis at rates applicable to U.S. holders, and in addition, if these
dividends are received by a non-U.S. holder that is a corporation may,
under certain circumstances, also be subject to an additional "branch
profits tax" at a 30% rate or at a lower rate if so specified in an
applicable income tax treaty.
Under U.S. Treasury regulations currently in effect, dividends paid
to an address in a foreign country are presumed to be paid to a resident of
that country, unless the payor has knowledge to the contrary, for purposes
of the 30% withholding tax discussed above. Under current interpretations
of U.S. Treasury regulations, this presumption (that is, that dividends
paid to an address in a foreign country are paid to a resident of that
country unless the payor has knowledge to the contrary) also applies for
purposes of determining whether a lower tax treaty rate applies.
Under U.S. Treasury regulations that generally will apply to
dividends paid after December 31, 2000, if you claim the benefit of a lower
treaty rate, you will be required to satisfy certain certification
requirements.
GAIN ON DISPOSITION OF MOVE.COM STOCK
If you are a non-U.S. holder, you generally will not be subject to
U.S. federal income tax on gain recognized on a disposition of Move.com
stock unless:
o the gain is effectively connected to your conduct of a trade
or business in the U.S. (or to the extent required by an
applicable income tax treaty the gain is attributable to a
permanent establishment that you maintain in the U.S.);
o you are an individual, you are present in the U.S. for 183
or more days in the taxable year of the sale, and you
satisfy certain other conditions; or
o Cendant is or has been a "United States real property
holding corporation" for federal income tax purposes during
the five-year period ending on the date of disposition, and
you held, directly or indirectly, at any time during this
period, more than 5% of the common stock of Cendant (and you
are not eligible for any treaty exemption). Cendant has not
been, is not, and does not currently anticipate becoming a
"United States real property holding corporation" for U.S.
federal income tax purposes.
Effectively connected gains recognized by a corporate non-U.S.
holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or at a lower rate if so specified in an
applicable income tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, U.S. backup withholding-tax at a rate of 31% will apply
to dividends paid to you unless you provide a certificate of foreign status
or otherwise establish your status as an "exempt recipient."
U.S. information reporting and backup withholding requirements
generally will not apply to a payment of the proceeds of a sale of Move.com
stock made outside the U.S. through an office outside the U.S. of a
non-U.S. broker. However, U.S. information reporting, but not backup
withholding, will apply to a payment made outside the U.S. of the proceeds
of a sale of Move.com stock through an office outside the U.S. of a broker
under certain circumstances. Payment of the proceeds of a sale of Move.com
stock to or through a U.S. office of a broker will be subject to both U.S.
backup withholding and information reporting unless the non-U.S. holder
certifies its non-U.S. status under penalty of perjury or otherwise
establishes an exemption.
A non-U.S. holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing a refund
claim with the IRS.
LEGAL MATTERS
The validity of the shares of Move.com stock offered hereby will be
passed upon for us by Eric J. Bock, Senior Vice President, Legal of
Cendant. Mr. Bock owns stock of Cendant as well as options to purchase
shares of CD stock and Move.com stock. Certain legal matters in connection
with this offering will be passed upon for the underwriters by Shearman &
Sterling, New York, New York.
EXPERTS
The consolidated financial statements of Cendant and its
consolidated subsidiaries, except PHH Corporation for the year ended
December 31, 1996, incorporated in this prospectus by reference from our
annual report on Form 10-K/A for the year ended December 31, 1998 have been
audited by Deloitte & Touche LLP as stated in their report, (which
expresses an unqualified opinion and includes an explanatory paragraph
relating to a preliminary agreement to settle the principal securities
class action as described in Notes 18 and 27, and the change in the method
of recognizing revenue and membership solicitation costs as described in
Note 2) which is incorporated herein by reference. The consolidated
financial statements of PHH Corporation for 1996 (consolidated with those
of Cendant), not incorporated separately herein, have been audited by KPMG
LLP, as stated in their report incorporated herein by reference. Such
consolidated financial statements of Cendant, except for PHH Corporation
for 1996, are incorporated by reference herein in reliance upon the report
of Deloitte & Touche LLP given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of PHH Corporation for the
year ended December 31, 1996, are consolidated with those of Cendant. With
respect to the consolidated financial statements of PHH Corporation for the
year ended December 31, 1996, the Cendant consolidated financial statements
which are incorporated by reference in this prospectus, have been
incorporated by reference in reliance upon the report of KPMG LLP,
independent auditors, incorporated herein by reference and upon the
authority of such firm as experts in accounting and auditing.
The combined financial statements of Move.com Group included
(wholly owned by Cendant) in this prospectus have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report (which
expresses an unqualified opinion and includes an explanatory paragraph
relating to the relationship of Move.com Group to Cendant) appearing
herein, and are included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
UNDERWRITING
Cendant Corporation and the underwriters named below have entered
into an underwriting agreement with respect to the shares of Move.com stock
being offered. Subject to various conditions, each underwriter has
severally agreed to purchase the number of shares indicated in the
following table. Goldman, Sachs & Co. and _______________ are the
representatives of the underwriters.
Underwriters Number of Shares
------------ ----------------
Goldman, Sachs & Co. ..........................
Total.................................. ----------------
-----------------
If the underwriters sell more shares than the total number set
forth in the table above, the underwriters have an option to buy up to an
additional _____ shares from Cendant Corporation. The underwriters may
exercise that option for 30 days. If any shares are purchased pursuant to
this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting
discounts to be paid to the underwriters by Cendant Corporation. Such
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase _____ additional shares.
Paid by Cendant
No Exercise Full Exercise
------------------ ----------------
Per Share ................... $ $
Total ....................... $ $
Shares sold by the underwriters to the public are being offered at
the initial public offering price set forth on the cover page of this
prospectus. Any shares sold by the underwriters to securities dealers may
be sold at a discount of up to $_____ per share from the initial public
offering price. Any such securities dealers may resell any shares purchased
from the underwriters to certain other brokers or dealers at a discount of
up to $_____ per share from the initial public offering price. If all of
the shares are not sold at the initial offering price, the representatives
may change the offering price and the other selling terms.
The underwriters have reserved for sale, at the initial public
offering price, up to ______shares of Move.com stock for directors,
officers and business partners of Cendant Corporation. At the discretion of
the management of Cendant Corporation, other parties, including friends and
family of key employees of Cendant Corporation, may participate in the
directed share program. The number of shares available for sale to the
general public in the offering will be reduced to the extent such persons
purchase directed shares. Any directed shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.
Cendant Corporation, its directors, executive officers and our
other significant stockholders have agreed with the underwriters not to
dispose of or hedge any of their common stock or securities convertible
into or exchangeable for shares of Move.com stock, subject to certain
exceptions, during the period from the date of this prospectus continuing
through the date ___ days after the date of this prospectus, except with
the prior written consent of Goldman, Sachs & Co. which shall not be
unreasonably withheld.
Prior to the offering, there has been no public market for the
shares. The initial public offering price will be negotiated among Cendant
Corporation and the representatives. Among the factors to be considered in
determining the initial public offering price of the shares, in addition to
prevailing market conditions, will be Move.com Group's historical
performance, estimates of the business potential and earnings prospects of
Move.com Group, an assessment of Move.com Group's management and the
consideration of the above factors in relation to market valuation of
companies in related businesses.
Cendant Corporation has applied to have the Move.com stock listed
on the NYSE under the symbol "MOV". In order to meet one of the
requirements for listing the Move.com stock on the NYSE, the underwriters
have undertaken to sell lots of 100 or more shares to a minimum of 2,000
beneficial holders.
In connection with the offering, the underwriters may purchase and
sell shares of Move.com stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover
positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares than they are required to
purchase in the offering. Stabilizing transactions consist of certain bids
or purchases made for the purpose of preventing or retarding a decline in
the market price of the common stock while the offering is in progress.
The underwriters may impose a penalty bid. This occurs when a
particular underwriter pays to the underwriters a portion of the
underwriting discount received by it because the representatives have
repurchased shares sold by or for the account of such underwriter in
stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or
otherwise affect the market price of the Move.com stock. As a result, the
price of the shares may be higher than the price that otherwise might exist
in the open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. These transactions may be
effected on the NYSE, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to
exceed 5% of the total number of shares offered.
Cendant Corporation estimates that its share of the total expenses
of the offering, excluding underwriting discounts and commissions, will be
approximately $________.
Cendant Corporation has agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act.
ILLUSTRATION OF TERMS
The following illustrations show how to calculate the Retained
Interest Percentage, the Outstanding Interest Percentage, the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest in
Move.com Group and the Total Number of Notional Move.com Shares Deemed
Outstanding after giving effect to certain hypothetical dividends,
issuances, repurchases and transfers, in each case based on the assumptions
set forth herein. In these illustrations, the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in Move.com Group is
initially assumed to be 100. Unless otherwise specified, each illustration
below should be read independently as if none of the other transactions
referred to below had occurred. These illustrations are not intended to be
complete explanations of the matters covered and are qualified in their
entirety by the more detailed information contained elsewhere in the
prospectus. These illustrations are purely hypothetical and the numbers
used (including assumptions of market value) were chosen to simplify the
calculations and are not intended to represent estimates of actual numbers
or values. Any capitalized terms which are not defined in Annex I have the
meaning ascribed to them in the prospectus.
"Total Number of Notional Move.com Shares Deemed Outstanding" means
the number of shares of Move.com stock outstanding plus the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest in
Move.com Group.
At any given time, the percentage interest in Move.com Group
intended to be represented by the outstanding shares of Move.com stock
(i.e., the Outstanding Interest Percentage) is equal to:
Number of outstanding shares of Move.com stock
--------------------------------------------
Total Number of Notional Move.com Shares Deemed Outstanding
and the remaining percentage interest in Move.com Group intended to be
represented by Cendant Group's Retained Interest in Move.com Group (i.e.,
the Retained Interest Percentage) is equal to:
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in Move.com Group
----------------------------------------------------------------------------
Total Number of Notional Move.com Shares Deemed Outstanding
The sum of the Outstanding Interest Percentage and the Retained
Interest Percentage would always equal 100%. In the examples below, before
the first issuance of shares of Move.com stock the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in Move.com
Group and the Total Number of Notional Move.com Shares Deemed Outstanding
are each equal to 100, the Retained Interest Percentage is 100% and the
Outstanding Interest Percentage is 0%.
ISSUANCE OF MOVE.COM STOCK
The following illustrations reflect an assumed issuance by Cendant
Corporation of 15 shares of Move.com stock under the Move.com Group Stock
Option Plan or in an offering.
ISSUANCE FOR ACCOUNT OF CENDANT GROUP
Assume the issuance is attributed to Cendant Group in respect of
its Retained Interest in Move.com Group (as currently planned), with the
net proceeds credited solely to Cendant Group.
Shares previously issued and outstanding........................... 0
Newly issued shares for account of Cendant Group................... 15
--
Total issued and outstanding after the offering................. 15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would decrease by the number
of shares of Move.com stock sold for the account of Cendant
Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to the
Offering....................................................100
Shares issued in the Offering................................... 15
---
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after the Offering...... 85
===
o As a result, the issued and outstanding shares (15) would
represent an Outstanding Interest Percentage of 15%, calculated
as follows:
15
-------
15 + 85
The Retained Interest Percentage would accordingly be 85%.
o In this case, in the event of any dividend or other distribution
paid on the outstanding shares of Move.com stock (other than a
dividend or other distribution payable in shares of Move.com
stock), Cendant Group would be credited, and Move.com Group
would be charged, with an amount equal to 567% (representing the
ratio of the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group (85) to the total
number of shares of Move.com stock issued and outstanding
following the Offering (15)) of the aggregate amount of such
dividend or distribution. If, for example, a dividend of $1.00
per share were declared and paid on the 15 shares of Move.com
stock outstanding (an aggregate of $15), Cendant Group would be
credited with $85, and Move.com Group would be charged with that
amount in addition to the $15 dividend paid to the holders of
Move.com stock (a total of $100).
ISSUANCE FOR ACCOUNT OF MOVE.COM GROUP
Assume the issuance is attributed to Move.com Group as an increase
in its equity, with the net proceeds credited solely to Move.com Group.
Shares previously issued and outstanding........................ 0
Newly issued shares for account of Move.com Group............... 15
--
Total issued and outstanding after the Offering............. 15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (100) would remain
unchanged.
o As a result, the issued and outstanding shares (15) would
represent an Outstanding Interest Percentage of about 13%,
calculated as follows:
15
--------
15 + 100
The Retained Interest Percentage would accordingly be about 87%.
o In this case, in the event of any dividend or other distribution
paid on the outstanding shares of Move.com stock (other than a
dividend or other distribution payable in shares of Move.com
stock), Cendant Group would be credited, and Move.com Group
would be charged, with an amount equal to 667% (representing the
ratio of the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group (100) to the total
number of shares of Move.com stock issued and outstanding
following the Offering (15)) of the aggregate amount of such
dividend or distribution.
ADDITIONAL ISSUANCES OF MOVE.COM STOCK
The following illustrations reflect an assumed issuance of an
additional 15 shares of Move.com stock after the assumed initial issuance
of 15 shares for the account of Cendant Group.
ADDITIONAL ISSUANCES FOR ACCOUNT OF CENDANT GROUP
Assume the issuance is attributed to Cendant Group in respect of
its Retained Interest in Move.com Group, with the net proceeds credited
solely to Cendant Group.
Shares previously issued and outstanding........................ 15
Newly issued shares for account of Cendant Group................ 15
--
Total issued and outstanding after additional offering...... 30
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would decrease by the number
of shares of Move.com stock issued for the account of Cendant
Group
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to the
additional offering......................................... 85
Newly issued shares for account of Cendant Group................ 15
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after the additional
offering.................................................... 70
==
o As a result, the total issued and outstanding shares (30) would
in the aggregate represent an Outstanding Interest Percentage of
30%, calculated as follows:
30
-------
30 + 70
The Retained Interest Percentage would accordingly be reduced to 70%.
o In this case, in the event of any dividend or other distribution
paid on Move.com stock (other than a dividend or other
distribution payable in shares of Move.com stock), Cendant Group
would be credited, and Move.com Group would be charged, with an
amount equal to 233% (representing the ratio of the Number of
Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group (70) to the total number of shares of
Move.com stock issued and outstanding following the additional
offering (30)) of the aggregate amount of such dividend or
distribution.
ADDITIONAL ISSUANCES FOR ACCOUNT OF MOVE.COM GROUP
Assume the issuance is attributed to Move.com Group as an increase
in its equity, with the net proceeds credited solely to Move.com Group.
Shares previously issued and outstanding........................ 15
Newly issued shares for account of Move.com Group............... 15
--
Total issued and outstanding after the additional offering...30
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (85) would remain unchanged.
o As a result, the total issued and outstanding shares (30) would
in the aggregate represent an Outstanding Interest Percentage of
about 26%, calculated as follows:
30
-------
30 + 85
The Retained Interest Percentage would accordingly be reduced to about 74%.
o In this case, in the event of any dividend or other distribution
paid on Move.com stock (other than a dividend or other
distribution payable in shares of Move.com stock), Cendant Group
would be credited, and Move.com Group would be charged, with an
amount equal to 283% (representing the ratio of the Number of
Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group (85) to the total number of shares of
Move.com stock issued and outstanding following the additional
offering (30)) of the aggregate amount of such dividend or
distribution.
ISSUANCES OF CONVERTIBLE SECURITIES
If we were to issue any securities convertible into or exercisable
for shares of Move.com stock, the Outstanding Interest Percentage and the
Retained Interest Percentage would be unchanged at the time of such
issuance. If any shares of Move.com stock were issued upon conversion or
exercise of such securities, however, then the Outstanding Interest
Percentage and the Retained Interest Percentage would be affected as shown
above under "Additional Issuances for Account of Cendant Group", if such
securities were attributed to Cendant Group, or under "Additional Issuances
for Account of Move.com Group", if such securities were attributed to
Move.com Group.
REPURCHASES OF MOVE.COM STOCK
The following illustrations reflect an assumed repurchase by
Cendant Corporation of 5 shares of Move.com stock after the assumed initial
issuance of 15 shares of Move.com stock for the account of Cendant Group.
REPURCHASE FOR THE ACCOUNT OF CENDANT GROUP
Assume the repurchase is attributed to Cendant Group as an increase
in its Retained Interest in Move.com Group, with the cost charged solely
against Cendant Group.
Shares previously issued and outstanding........................ 15
Shares repurchased for account of Cendant Group................. 5
---
Total issued and outstanding after repurchase............... 10
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be increased by the
number of any shares of Move.com stock repurchased for the
account of Cendant Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to repurchase..... 85
Number of shares repurchased for the account of Cendant Group... 5
---
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after repurchase........ 90
==
o As a result, the total issued and outstanding shares (10) would
in the aggregate represent an Outstanding Interest Percentage of
10%, calculated as follows:
10
-------
10 + 90
The Retained Interest Percentage would accordingly be increased to 90%.
REPURCHASE FOR ACCOUNT OF MOVE.COM GROUP WITHOUT PARTICIPATION BY CENDANT GROUP
Assume the repurchase is attributed to Move.com Group, with the
cost being charged solely against Move.com Group. Further assume that the
board of directors does not determine to transfer assets from Move.com
Group to Cendant Group to hold constant the Outstanding Interest Percentage
and Retained Interest Percentage.
Shares previously issued and outstanding........................ 15
Shares repurchased for account of Move.com Group................ 5
---
Total issued and outstanding after repurchase............... 10
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (85) would remain unchanged.
o As a result, the total issued and outstanding shares (10) would
in the aggregate represent an Outstanding Interest Percentage of
about 11%, calculated as follows:
10
-------
10 + 85
The Retained Interest Percentage would accordingly be increased to about
89%.
REPURCHASE FOR ACCOUNT OF MOVE.COM GROUP WITH PARTICIPATION BY CENDANT GROUP
Assume the repurchase is attributed to Move.com Group, with the
cost being charged solely against Move.com Group. Further assume that the
repurchase is made in connection with a tender offer for 5, or 33%, of the
then outstanding shares at a price of $20 per share, and that the board of
directors determines to transfer cash or other assets from Move.com Group
to Cendant Group to hold constant the Outstanding Interest Percentage and
Retained Interest Percentage.
Shares previously issued and outstanding........................ 15
Shares repurchased for account of Move.com Group................ 5
---
Total issued and outstanding after repurchase............... 10
==
o In order to hold constant the Outstanding Interest Percentage
and Retained Interest Percentage, the board of directors could
determine that the Market Value of a share of Move.com stock in
this context is $20 and transfer from Move.com Group to Cendant
Group an amount of cash or other assets equal to 567%
(representing the ratio of the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group
(85) to the total number of shares of Move.com stock issued and
outstanding (15), in each case immediately prior to the
repurchase) of the aggregate amount of the cash paid in the
tender offer to holders of outstanding shares of Move.com stock
($100), or a total of $567.
o In that case, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in Move.com Group (85) would
decrease by the amount of cash so transferred ($567) divided by
the Market Value per share of Move.com stock ($20).
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to transfer....... 85
Adjustment in respect of Cendant Group's Retained Interest in
Move.com Group to reflect transfer to Cendant Group of funds
theretofore allocated to Move.com Group..................... 28
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after transfer.......... 57
==
o As a result, the total issued and outstanding shares (10) would
in the aggregate continue to represent an Outstanding Interest
Percentage of 15%, calculated as follows:
10
-------
10 + 57
The Retained Interest Percentage would accordingly continue to be 85%.
o Assuming that the board of directors transferred only half of
the $567 amount, or $283.50, from Move.com Group to Cendant
Group, the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group (85) would decrease
by the amount of cash so transferred ($283.50) divided by the
Market Value per share of Move.com stock ($20).
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to transfer....... 85
Adjustment in respect of Cendant Group's Retained Interest in
Move.com Group to reflect transfer to Cendant Group of cash
theretofore allocated to Move.com Group......................14
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after transfer.......... 71
==
o In that case, as a result, the total issued and outstanding
shares (10) would in the aggregate represent an Outstanding
Interest Percentage of about 12%, calculated as follows:
10
-------
10 + 71
The Retained Interest Percentage would accordingly be increased to about
88%.
DIVIDENDS ON MOVE.COM STOCK
The following illustrations reflect assumed dividends of Move.com
stock on outstanding shares of CD stock and outstanding shares of Move.com
stock, respectively, after the assumed initial issuance of 15 shares of
Move.com stock for the account of Cendant Group.
STOCK DIVIDEND OF MOVE.COM STOCK ON CD STOCK
Assume 1,000 shares of CD stock are outstanding and Cendant
Corporation declares a dividend of 1/20 of a share of Move.com stock on
each outstanding share of CD stock.
Shares previously issued and outstanding........................ 15
Newly issued shares for account of Cendant Group................ 50
--
Total issued and outstanding after dividend................. 65
==
o Any dividend of shares of Move.com stock to the holders of
shares of CD stock would be treated as a reduction in the Number
of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to dividend....... 85
Number of shares distributed on outstanding shares of Cendant
Corporation stock for account of Cendant Group.............. 50
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after dividend.......... 35
==
o As a result, the total issued and outstanding shares (65) would
in the aggregate represent an Outstanding Interest Percentage of
65%, calculated as follows:
65
-------
65 + 35
The Retained Interest Percentage would accordingly be reduced to 35%. Note,
however, that after the dividend, the holders of CD stock would also hold
50 shares of Move.com stock, which would be intended to represent a 50%
interest in the value attributable to Move.com Group.
STOCK DIVIDEND OF MOVE.COM STOCK ON MOVE.COM STOCK
Assume Cendant Corporation declares a dividend of 1/5 of a share of
Move.com stock on each outstanding share of Move.com stock.
Shares previously issued and outstanding........................15
Newly issued shares for account of Move.com Group............... 3
--
Total issued and outstanding after dividend.................18
==
o The number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group would be increased
proportionately to reflect the stock dividend payable in shares
of Move.com stock to holders of shares of Move.com stock. That
is, the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group would be increased
by a number equal to 567% (representing the ratio of the Number
of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group (85) to the number of shares of
Move.com stock issued and outstanding (15), in each case
immediately prior to such dividend) of the aggregate number of
shares issued in connection with such dividend (3), or 17.
Number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group prior to dividend....... 85
Adjustment in respect of Cendant Group's retained interest
to reflect shares distributed on outstanding shares
of Move.com stock........................................... 17
--
Number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group after dividend..........102
===
o As a result, the total issued and outstanding shares (18) would
in the aggregate continue to represent an outstanding interest
percentage of 15%, calculated as follows:
18
--------
18 + 102
The Retained Interest Percentage would accordingly continue to be 85%.
CAPITAL TRANSFERS OF CASH OR OTHER ASSETS BETWEEN CENDANT GROUP AND
MOVE.COM GROUP
CAPITAL CONTRIBUTION OF CASH OR OTHER ASSETS FROM CENDANT GROUP TO
MOVE.COM GROUP
The following illustration reflects the assumed contribution by
Cendant Group to Move.com Group, after the assumed initial issuance of 15
shares of Move.com stock for the account of Cendant Group, of $40 of assets
allocated to Cendant Group at a time when the market value of the Move.com
stock is $20 per share.
Shares previously issued and outstanding........................ 15
Newly issued shares............................................. 0
--
Total issued and outstanding after contribution............. 15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be increased to
reflect the contribution to Move.com Group of assets theretofore
allocated to Cendant Group by a number equal to the value of the
assets contributed ($40) divided by the Market Value of Move.com
stock at that time ($20), or 2 shares.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to contribution... 85
Increase to reflect contribution to Move.com Group of assets
allocated to Cendant Group.................................. 2
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after contribution.......87
==
o As a result, the total issued and outstanding shares (15) would
in the aggregate represent an Outstanding Interest Percentage of
a little less than 15%, calculated as follows:
15
-------
15 + 87
The Retained Interest Percentage would accordingly be increased to a little
more than 85%.
RETURN OF CAPITAL TRANSFER OF CASH OR OTHER ASSETS FROM MOVE.COM GROUP
TO CENDANT GROUP
The following illustration reflects the assumed transfer by
Move.com Group to Cendant Group, after the assumed initial issuance of 15
shares of Move.com stock for the account of Cendant Group, of $40 of assets
allocated to Move.com Group on a date on which the Market Value of Move.com
stock is $20 per share.
Shares previously issued and outstanding........................ 15
Newly issued shares............................................. 0
--
Total issued and outstanding after contribution............. 15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be decreased to
reflect the transfer to Cendant Group of assets theretofore
allocated to Move.com Group by a number equal to the value of
the assets transferred ($40) divided by the Market Value of
Move.com stock at that time ($20), or 2 shares.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to contribution....85
Decrease to reflect transfer to Cendant Group of assets
allocated to Move.com Group................................. 2
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after contribution.......83
==
o As a result, the total issued and outstanding shares (15) would
in the aggregate represent an Outstanding Interest Percentage of
a little more than 15%, calculated as follows:
15
-------
15 + 83
The Retained Interest Percentage would accordingly be decreased to a little
less than 85%.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
PAGE
Combined Financial Statements
<S> <C>
Independent Auditors' Report..............................................................F-2
Combined Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997....F-3
Combined Balance Sheets as of December 31, 1999 and 1998..................................F-4
Combined Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997....F-5
Combined Statements of Group Equity for the Years Ended December 31, 1999, 1998 and 1997..F-6
Notes to Combined Financial Statements....................................................F-7
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Cendant Corporation:
We have audited the accompanying combined balance sheets of Move.com Group
(wholly owned by Cendant Corporation, "Cendant"), as of December 31, 1999
and 1998 and the related combined statements of operations, group equity
and cash flows for the years ended December 31, 1999, 1998 and 1997. These
combined financial statements are the responsibility of management. Our
responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of Move.com Group at
December 31, 1999 and 1998 and the results of its operations and its cash
flows for the years ended December 31, 1999, 1998 and 1997 in conformity
with generally accepted accounting principles.
Move.com Group is an integrated business unit of Cendant; consequently, as
indicated in Note 1, these combined financial statements reflect
allocations of certain assets, liabilities, revenue, expenses and cash
flows to the Move.com Group. The financial position, results of operations
and cash flows of the Move.com Group could differ from those that would
have resulted had the Move.com Group operated autonomously or as an entity
independent of Cendant.
/s/ Deloitte & Touche LLP
San Francisco, California
February 1, 2000
<TABLE>
<CAPTION>
MOVE.COM GROUP
(WHOLLY OWNED BY CENDANT CORPORATION)
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net revenue $ 17,647 $ 9,674 $ 5,670
Cost of revenue 3,149 1,664 1,091
----------- ----------- -----------
Gross profit 14,498 8,010 4,579
----------- ----------- -----------
Operating expenses:
Product development 3,940 193 -
Selling and marketing 16,020 5,484 3,906
General and administrative 16,751 1,922 1,227
Depreciation 291 188 69
Amortization 1,926 1,638 865
----------- ----------- -----------
Total operating expenses 38,928 9,425 6,067
----------- ----------- -----------
Loss before income tax benefit (24,430) (1,415) (1,488)
----------- ----------- -----------
Income tax benefit 9,976 572 603
----------- ----------- -----------
Net loss $ (14,454) $ (843) $ (885)
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
<TABLE>
<CAPTION>
MOVE.COM GROUP
(WHOLLY OWNED BY CENDANT CORPORATION)
COMBINED BALANCE SHEETS
(IN THOUSANDS)
AS OF DECEMBER 31,
-------------------------
ASSETS 1999 1998
----------- ------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 1,009 $ -
Accounts receivable (net of allowance for doubtful accounts
of $811 and $427) 7,730 2,651
Other current assets 2,610 58
Deferred income taxes 330 173
----------- ------------
Total current assets 11,679 2,882
Deferred income taxes 1,268 727
Property and equipment, net 3,354 1,512
Goodwill, net 5,111 3,493
Other intangibles, net 543 -
Other assets 45 -
----------- ------------
Total assets $ 22,000 $ 8,614
=========== ============
LIABILITIES AND GROUP EQUITY
Liabilities
Accounts payable $ 119 $ 555
Accrued expenses 11,816 575
Deferred revenue 9,040 3,249
----------- ------------
Total current liabilities 20,975 4,379
Commitments and contingencies (Note 8)
Group equity 1,025 4,235
----------- ------------
Total liabilities and Group equity $ 22,000 $ 8,614
=========== ============
</TABLE>
See notes to combined financial statements.
<TABLE>
<CAPTION>
MOVE.COM GROUP
(WHOLLY OWNED BY CENDANT CORPORATION)
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
----------- ----------- -----------
Operating Activities:
<S> <C> <C> <C>
Net loss $ (14,454) $ (843) $ (885)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 322 219 80
Amortization 1,926 1,638 865
Provision for doubtful accounts 8 382 181
Non-cash stock option compensation 264 - -
Loss on disposal of assets 282 - 4
Deferred income taxes (698) (519) (186)
Net change in assets and liabilities
(net of effects of acquisitions):
Accounts receivable (5,463) (1,828) (931)
Other current assets (2,548) 32 (3)
Accounts payable (436) 129 132
Accrued expenses 10,866 114 376
Deferred revenue 5,541 1,955 795
Other assets (45) - -
----------- ----------- ------------
Net cash (used in) provided by operating activities (4,435) 1,279 428
----------- ----------- ------------
Investing Activities:
Purchases of property and equipment (2,482) (881) (662)
Net assets acquired and acquisition related payments (2,588) (240) (3,206)
----------- ----------- ------------
Net cash used in investing activities (5,070) (1,121) (3,868)
----------- ----------- ------------
Financing Activities:
Net funding from (contribution to) Cendant 10,514 (158) 3,440
----------- ----------- ------------
Net change in cash 1,009 - -
Cash and equivalents, beginning of period - - -
Cash and equivalents, end of period $ 1,009 $ - $ -
=========== =========== ============
Supplemental Non-Cash Investing Activities:
Common stock issued in conjunction with purchase $ 730 $ - $ -
business combination
=========== =========== ============
</TABLE>
See notes to combined financial statements.
<TABLE>
<CAPTION>
MOVE.COM GROUP
(WHOLLY OWNED BY CENDANT CORPORATION)
COMBINED STATEMENTS OF GROUP EQUITY
(IN THOUSANDS)
<S> <C> <C>
Balance, January 1, 1997 $ 2,681
Net funding from Cendant 3,440
Net loss (885)
-----------
Balance, December 31, 1997 5,236
Net distribution to Cendant (158)
Net loss (843)
-----------
Balance, December 31, 1998 4,235
Net funding from Cendant 10,514
Net loss (14,454)
Move.com, Inc. common stock issued in conjunction
with Metro-Rent, Inc. acquisition (Note 9) 730
-----------
Balance, December 31, 1999 $ 1,025
===========
</TABLE>
See notes to combined financial statements.
MOVE.COM GROUP
(WHOLLY OWNED BY CENDANT CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
1. ORGANIZATION
BACKGROUND
Move.com Group, wholly owned by Cendant Corporation ("Cendant"),
provides a broad range of quality relocation, real estate and
home-related products and services through its flagship portal
site, move.com and the move.com network. The move.com Web site was
launched on January 27, 2000. Move.com Group's operations include
the move.com network and the businesses of (1) Rent Net (an
operator of online rental guides, acquired in February 1996); (2)
Metro-Rent, Inc. ("MetroRent") (an online provider of fee-based
apartment vacancy reports, acquired in December 1999); (3) National
Home Connections, LLC (a facilitator of connecting and
disconnecting utilities, processor of address changes and provider
of moving-related products and services, acquired in May 1999); and
(4) Move.com Mortgage, Inc. (a mortgage marketing company).
The offline resources of Cendant as well as individual Web sites of
each of Cendant's real estate franchise systems are part of Cendant
Group, which includes all of the businesses operated by Cendant
other than the businesses that are part of Move.com Group. However,
the franchise systems' Web sites are considered part of the
move.com network as a result of intercompany agreements that permit
Move.com Group to manage and sell advertisements on these sites and
display home listings from the CENTURY 21(R), COLDWELL BANKER(R)
and ERA(R) real estate franchise systems. Through an additional
intercompany agreement, Move.com Group provides online local
merchant discount offers for customers of Welcome Wagon, a
distributor of welcoming packages to new homeowners and consumers
throughout the United States and Canada. Move.com Group allows
users to apply for and obtain mortgage products and services
through arrangements with Cendant Mortgage Corporation, provides
users with relocation services and information leveraging Cendant
Mobility's expertise, and provides users with access to third-party
providers of relocation, real estate and home-related products and
services.
The operating results of attributed and acquired companies are
included in Move.com Group's combined financial statements since
the respective dates of acquisition by Cendant or Move.com Group.
Accordingly, the historical financial information contained herein
represents that of Rent Net only at and for the years ended
December 31, 1998 and 1997.
Cendant acquired Rent Net from the General Partners of Rent Net
(the "Sellers") under an asset purchase agreement (the "Agreement")
which was attributed to the Move.com Group. Under the terms of the
Agreement, the Sellers received $3,000 in cash and Cendant stock on
the acquisition date. The Sellers received additional payments of
$3,446 based on the earnout provisions of the Agreement, bringing
the total purchase price to $6,446. The excess of the purchase
price over the fair value of net assets acquired was $6,570. The
acquisition was accounted for using the purchase method of
accounting, and accordingly, the operating results are included in
the combined statements of operations since the acquisition date.
TRACKING STOCK PROPOSAL
The shareholders of Cendant are scheduled to vote on a proposal
(the "Tracking Stock Proposal") to authorize the issuance of a new
series of common stock, to be designated as Move.com stock,
intended to reflect the performance of Move.com Group. The Tracking
Stock Proposal will allow Cendant to amend and restate its charter
to (1) create a new series of Cendant common stock called Move.com
stock that could be issued from time to time by the board of
directors of Cendant, (2) re-classify each outstanding share of
existing common stock into a share of CD Stock, and (3) increase
the number of authorized shares of common stock from 2,000,000,000
to 2,500,000,000 initially comprised of 2,000,000,000 shares of CD
Stock and 500,000,000 shares of Move.com stock. Although the
issuance of Move.com stock is intended to track the performance of
Move.com Group, shareholders of Move.com stock, if any, will still
be subject to all the risks associated with an investment in
Cendant and all of its businesses, assets and liabilities.
Cendant expects to issue shares of Move.com stock in one or more
private or public financings. The specific terms of the financing,
including whether they are private or public, the amount of
Move.com stock issued, and the timing of the financing, will depend
upon factors such as stock market conditions and performance of the
Move.com Group.
BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts
of the Move.com Group. All intercompany accounts and transactions are
eliminated in combination. In order to prepare the separate combined
financial statements of the Move.com Group, Cendant has allocated, for
financial reporting purposes, certain assets, liabilities, revenue,
expenses and cash flows to the Move.com Group. The financial position,
results of operations and cash flows of the Move.com Group could differ
from those that would have resulted had the Move.com Group operated
autonomously or as an entity independent of Cendant. The Move.com Group's
combined financial statements reflect the application of certain cash
management and allocation policies adopted by the board of directors of
Cendant. These combined financial statements should be read in conjunction
with the consolidated financial statements of Cendant.
Allocation and related party transaction policies adopted by the
board of directors of Cendant can be rescinded or amended at the
sole discretion of the board of directors without approval by the
stockholders, although no such changes are currently contemplated.
Any such changes adopted by the board of directors would be made in
its good faith business judgement of Cendant's best interests,
taking into consideration the interest of all Cendant shareholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported
amounts and related disclosures. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS - Move.com Group considers all highly
liquid investments with an original maturity of three months or
less to be cash equivalents.
CONCENTRATION OF CREDIT RISK - Financial instruments that
potentially subject the Move.com Group to concentrations of credit
risk consist of accounts receivable. Management periodically
performs credit evaluations of its customers' financial condition
and generally does not require collateral on accounts receivable.
During the years ended December 31, 1999, 1998 and 1997, no
customers accounted for more than 10% of net revenue or net
accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Move.com Group's financial
instruments, including cash and cash equivalents, accounts
receivable and accounts payable are carried at cost, which
approximates their fair value because of the short-term maturity
and the relatively stable interest rate environment.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost
less accumulated depreciation. Depreciation is computed by the
straight-line method over the estimated useful lives of five and
seven years. Amortization of lease improvements is computed by the
straight-line method over the estimated useful lives of the assets
or the lease term, if shorter.
GOODWILL - Goodwill, which represents the excess of cost over fair
value of net assets acquired, is amortized on a straight-line basis
over an estimated useful life of five years.
OTHER INTANGIBLES - Other intangibles, which represents a covenant
not to compete (see Note 9 "Acquisitions - National Home
Connections, LLC") is amortized on a straight-line basis over a
useful life of seven years.
ASSET IMPAIRMENTS - The Move.com Group periodically evaluates the
recoverability of its goodwill and long-lived assets, on an
undiscounted basis, comparing the respective carrying values to the
current and expected future cash flows to be generated from such
assets.
REVENUE RECOGNITION - The Move.com Group's primary sources of
revenue are from listing subscription fees (paid by various
apartment, senior housing, corporate housing and self storage
managers) and sponsorship advertising. Revenue from the listing
subscription fees is recognized ratably over the contract period.
Revenue from sponsorship advertising is recognized as earned
pursuant to the contractual relationship. Deferred revenue
represents the unearned portion of listing and advertising fees
received in advance.
PRODUCT DEVELOPMENT EXPENSES - Operating expenses include costs
incurred by the Move.com Group to develop and enhance the move.com
network. Product development expenses are expensed when incurred.
ADVERTISING EXPENSES - Advertising expenses are expensed in the
period incurred. For the years ended December 31, 1999, 1998 and
1997, advertising expenses were $10,247, $1,926, and $1,120,
respectively.
INCOME TAXES - The Move.com Group is included in the consolidated
federal income tax return of Cendant. In addition, the Move.com
Group files unitary and combined state income tax returns with
Cendant in jurisdictions where required. The income tax benefit and
balance sheet accounts are based on allocations from Cendant and
are computed as if the Move.com Group filed its federal and state
income tax returns on a stand-alone basis.
EARNINGS PER SHARE - Historical earnings per share for the Move.com
Group has been omitted from the statements of operations since the
Move.com stock was not part of the capital structure of the
Move.com Group for the periods presented. Following the
implementation of the Tracking Stock Proposal, earnings per share
for the Move.com Group will be computed by dividing (1) the product
of the earnings or losses of the Move.com Group multiplied by the
"Outstanding Move.com Group Fraction" by (2) the weighted average
number of shares of outstanding Move.com stock and dilutive
Move.com stock equivalents during the applicable period. The
"Outstanding Move.com Group Fraction" is a fraction, the numerator
of which is such number of shares of the Move.com stock outstanding
and the denominator of which is the number of shares, that if
issued, would represent 100 percent of the equity in earnings or
losses of the Move.com Group.
COMPREHENSIVE INCOME - Effective January 1, 1998, Move.com Group
adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity
(net assets) during a period from non-owner sources. To date,
Move.com Group has not had any transactions that are required to be
reported in comprehensive income.
RECENT ACCOUNTING PRONOUNCEMENTS - In March 1998, the American
Institute of Certified Public Accountants issued Statement of
Position ("SOP") No. 98-1, "Software for Internal Use", which
provides guidance on accounting for the cost of computer software
developed or obtained for internal use. The adoption of SOP 98-1 in
the first quarter of 1999 did not have a significant impact on the
Move.com Group's financial position, results of operations or cash
flows.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The statement requires the recognition of all
derivatives as either assets or liabilities in the balance sheet
and the measurement of those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on
the planned use of the derivative and the resulting designation.
Since Move.com Group does not currently hold any derivative
instruments and does not engage in hedging activities, the impact
of adoption of SFAS No. 133 is not currently expected to have a
material impact on financial position, results of operations or
cash flows. Move.com Group will be required to implement SFAS No.
133 in the first quarter of fiscal 2001.
3. CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES
TREASURY ACTIVITIES
Cendant has provided all necessary funding for the operations and
investments of the Move.com Group since inception and such funding
has been accounted for as capital contributions from Cendant.
Accordingly, no interest charges from Cendant have been reflected
in the accompanying combined financial statements. Surplus cash,
transferred from the Move.com Group from time to time, has been
accounted for as a return of capital.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Cendant allocates the cost of its general and administrative
("G&A") services to the Move.com Group generally based on
utilization. Where determinations based on utilization are
impracticable, Cendant uses other methods and criteria that
management believes to be equitable and provide a reasonable
estimate of costs attributable to the Move.com Group.
Corporate G&A allocation included in the accompanying combined
statements of operations include charges for legal, accounting (tax
and financial), information and telecommunications services,
marketing, intellectual property, public relations, corporate
offices and travel.
INCOME TAXES
The income tax benefit and balance sheet accounts are based on
allocations from Cendant and are computed as if the Move.com Group
filed its federal and state income tax returns on a stand-alone
basis.
4. PROPERTY AND EQUIPMENT - NET
Property and equipment, net as of December 31 consisted of:
1999 1998
----------- -----------
Computer and telephone equipment $ 2,302 $ 944
Office furniture 307 372
Leasehold improvements 1,473 529
----------- -----------
4,082 1,845
Less accumulated depreciation and amortization (728) (333)
----------- -----------
$ 3,354 $ 1,512
=========== ===========
5. INCOME TAXES
The Move.com Group is included in the consolidated federal income
tax return of Cendant. In addition, the Move.com Group files
unitary and combined state income tax returns with Cendant in
jurisdictions where required. The income tax benefit and balance
sheet accounts are based on allocations from Cendant and are
computed as if the Move.com Group filed its federal and state
income tax returns on a stand-alone basis.
The income tax benefit (provision) for the years ended December 31
consisted of:
1999 1998 1997
---------- ----------- ----------
Current:
Federal $ 7,246 $ (3) $ 309
State 2,032 56 108
---------- ----------- ----------
9,278 53 417
---------- ----------- ----------
Deferred:
Federal 546 449 161
State 152 70 25
---------- ----------- ----------
698 519 186
---------- ----------- ----------
$ 9,976 $ 572 $ 603
========== =========== ==========
Net deferred income tax assets and liabilities and the related
temporary differences as of December 31 consisted of:
1999 1998
---------- -----------
Current deferred tax asset:
Provision for doubtful accounts $ 330 $ 173
Noncurrent deferred tax asset:
Depreciation and amortization 1,268 727
---------- -----------
$ 1,598 $ 900
========== ===========
For the years ended December 31, the Move.com Group's effective
income tax rate differs from the statutory federal rate as follows:
1999 1998 1997
---------- --------- ---------
Federal statutory rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefit 5.7 5.8 5.8
Other, net 0.1 (0.4) (0.3)
---------- --------- ---------
40.8% 40.4% 40.5%
========== ========= =========
6. GROUP EQUITY
Group equity represents the net amount of all funding received by
the Move.com Group from Cendant and the accumulated net losses of
the Move.com Group.
7. RELATED PARTY TRANSACTIONS
Cendant and its subsidiaries provide various services to and
receive various services from the Move.com Group. There are no
significant intercompany sales or purchases between Cendant Group
and the Move.com Group, with the exception of a sponsorship
agreement between the Move.com Group and Cendant Mortgage
Corporation and an Internet Cooperation Agreement with each of
Cendant's three real estate franchise systems. The significant
related party transactions are as follows:
CENDANT - CORPORATE
Cendant allocated an overhead charge for corporate general and
administrative services of $335, $290 and $170 during 1999, 1998
and 1997, respectively.
The Move.com Group has an Internet engineering services agreement
with Cendant. Services are charged based upon usage volume. The
charges were $1,773, $795 and $240 during 1999, 1998 and 1997,
respectively.
Effective January 1, 1999, Cendant entered into a four year
agreement with a telecommunications service provider (the
"Provider"), which was attributed to the Move.com Group, whereby
the use of the voice telecommunication services available to
Cendant pursuant to a Cendant agreement is shared with Move.com
Group. The Move.com Group receives bills directly from the Provider
and is obligated under the service agreement to meet its affiliate
guarantee of $300 of annual billings. Any shortfalls in meeting
that guarantee will be reimbursed to Cendant by the Move.com Group.
No such shortfall existed in 1999.
Move.com Group employees participate in Cendant sponsored medical
and defined contribution benefit plans. The cost of such plans is
allocated to the Move.com Group based on a percentage of total
payroll dollars. These allocations were $653, $346 and $291 during
1999, 1998 and 1997, respectively.
CENDANT MORTGAGE CORPORATION
Effective February 15, 1999, the Move.com Group and Cendant
Mortgage Corporation entered into a one year advertising agreement
whereby the Move.com Group provides advertising space and links to
various Cendant Mortgage Corporation mortgage programs and products
on its Web site. The agreement is renewable every six months
commencing after the first year until cancelled by either party.
The Move.com Group's 1999 revenue from this agreement was $360.
REAL ESTATE FRANCHISE SYSTEMS
On October 1, 1999, Move.com Group entered into 40-year Internet
Cooperation Agreements with each of Cendant's three real estate
franchise systems. Under terms of these agreements, Move.com Group
receives fees for Web site management. Such fees were $429 during
1999.
8. COMMITMENTS AND CONTINGENCIES
LEASES - Move.com Group leases its principal office facilities
under operating leases. During the fourth quarter of 1999, Move.com
Group entered into a lease for a larger facility that was occupied
during January 2000. Rental expense was $1,057, $368 and $73 for
the years ended December 31, 1999, 1998 and 1997, respectively.
Future minimum rental payments required under non-cancelable
operating leases as of December 31, 1999 are as follows:
2000 $ 3,760
2001 3,855
2002 3,892
2003 3,987
2004 4,081
Thereafter 8,448
--------
$ 28,023
========
LITIGATION - On April 15, 1998, Cendant announced that it
discovered accounting irregularities in the former business units
of CUC International Inc. Such discovery prompted investigations
into such matters by Cendant and the Audit Committee of the board
of directors of Cendant. Since the April 15, 1998 announcement,
more than 70 lawsuits claiming to be class actions, two lawsuits
claiming to be brought derivatively on Cendant's behalf and several
individual lawsuits have been filed in various courts against
Cendant and other defendants. The court has ordered consolidation
of many of the actions.
The Securities and Exchange Commission ("SEC") and the United
States Attorney for the District of New Jersey are conducting
investigations relating to the matters referenced above. The SEC
advised Cendant that its inquiry should not be construed as an
indication by the SEC or its staff that any violations of law have
occurred. While Cendant made all adjustments considered necessary
as a result of the findings from the investigations in restating
its financial statements, Cendant can provide no assurance that
additional adjustments will not be necessary as a result of these
government investigations.
On December 7, 1999, Cendant announced that it reached a
preliminary agreement to settle the principal securities class
action pending against Cendant in the U.S. District Court in
Newark, New Jersey relating to the common stock class action
lawsuits. Under the agreement, Cendant would pay the class members
$2.83 billion in cash. The settlement remains subject to execution
of a definitive settlement agreement and approval by the U.S.
District Court. If the preliminary settlement is not approved by
the U.S. District Court, Cendant can make no assurances that the
final outcome or settlement of such proceedings will not be for an
amount greater than that set forth in the preliminary agreement.
See Cendant's Form 8-K, dated December 7, 1999, for a description
of the preliminary agreement to settle the common stock class
action litigation.
EMPLOYEE RETENTION BONUS - In connection with Cendant's
announcement during May 1999 to create a real estate Internet
portal, later named move.com, Cendant made commitments to pay
one-time, broad-based retention bonuses to the Move.com Group
employees aggregating approximately $10,400. The costs associated
with the entire bonuses were attributed to the Move.com Group.
Bonus payments during 1999 were approximately $5,240. An additional
$2,145 was paid during January 2000 with the remaining payments to
be made by March 31, 2000. In 1999, $9,625 of the aggregate bonus
amount was expensed with the remaining $725 being expensed through
March 31, 2000, the date upon which the applicable employee must
still be employed to receive the payment.
9. ACQUISITIONS
METRORENT ACQUISITION
On December 17, 1999, Move.com Group purchased substantially all of
the assets and assumed substantially all of the liabilities of
MetroRent, for a total consideration of up to $3 million in cash
and up to $6 million of stock to be paid over several years subject
to meeting certain performance targets. The stock portion of the
consideration consists of a new class of non-voting common stock of
Move.com, Inc. (a part of the Move.com Group) mandatorily
redeemable for Move.com stock upon a public offering. Initial
consideration included $2.0 million in cash plus 48,756 shares of
the non-voting common stock. In the event that a public offering
has not occurred by December 31, 2005, or earlier at Move.com,
Inc.'s option, Move.com, Inc. must redeem each outstanding share of
Move.com common stock at $20.51 per share. In conjunction with this
acquisition, the Move.com Group committed to provide additional
capital of up to $1,900 to fund future MetroRent related
acquisitions. The acquisition was accounted for under the purchase
method of accounting and accordingly, the combined financial
statements include the results of the MetroRent business from the
date of acquisition.
The purchase price of $3,076 plus the fair value of net liabilities
acquired of $246 resulted in goodwill of $3,322 that is being
amortized on a straight-line basis over 5 years.
PRO FORMA INFORMATION
The following table reflects the unaudited operating results of the
Move.com Group for the years ended December 31, 1999 and 1998 on a
pro forma basis, which gives effect to the acquisition of
MetroRent. The pro forma results are not necessarily indicative of
the operating results that would have occurred had the MetroRent
acquisition been consummated on January 1, 1998, nor are they
intended to be indicative of results that may occur in the future.
The underlying pro forma information includes the amortization
expense associated with the assets acquired, the Move.com Group's
financial arrangements, certain purchase accounting adjustments and
related income tax effects.
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
----------- -----------
Net revenue $ 18,955 $ 10,801
Cost of revenue 3,602 2,155
Gross profit 15,353 8,646
Loss before income tax benefit (25,038) (2,030)
Net loss (14,814) (1,209)
NATIONAL HOME CONNECTIONS, LLC
In May 1999, Cendant, through its newly organized subsidiary
National Home Connections, LLC, purchased substantially all of the
assets and assumed all of the current liabilities of Utility
Connections, Inc. ("UCI"), which was attributed to the Move.com
Group for a total consideration of $600 in cash plus earnout
payments equal to 9.5% of the earnings before interest, taxes,
depreciation and amortization calculated over the next seven years.
The purchase agreement stipulates a "covenant not to compete,"
whereby the sellers of UCI agrees not to participate in any
competing businesses for a period up to seven years. Accordingly,
the initial purchase price was allocated to other intangible assets
and is amortized on a straight-line basis over seven years, the
estimated period to be benefitted. Earnout payments will be
allocated to goodwill and amortized over the remaining life of the
"covenant not to compete." The acquisition is not significant and
therefore, pro forma operating results are not included.
10. CHATHAM STREET HOLDINGS, LLC AGREEMENT
In September 1999, Cendant entered into an agreement with Chatham
Street Holdings, LLC ("Chatham") pursuant to which Chatham was
granted the right, until September 30, 2001, to purchase up to
1,561,000 shares of Move.com stock for approximately $16.02 per
share. In addition, for every two shares of Move.com stock
purchased by Chatham pursuant to the agreement, Chatham will be
entitled to receive a warrant to purchase one share of Move.com
stock at a price equal to $64.08 per share and a warrant to
purchase one share of Move.com stock at a price equal to $128.16
per share.
11. MOVE.COM GROUP STOCK OPTION PLAN
On October 29, 1999, the Board of Directors of Move.com, Inc.
adopted the Move.com, Inc. 1999 Stock Option Plan as amended
January 13, 2000 (the "Option Plan") which authorizes the granting
of up to six million shares of Move.com, Inc. common stock. All
active employees of the Move.com Group and its affiliates are
eligible to be granted options under the Option Plan. Options under
the plan generally have a 10 year term and are exercisable at 33%
per year commencing one year from the grant date. On October 29,
1999, 2,501,000 options to purchase shares of common stock of
Move.com, Inc. were granted to employees of Move.com Group at a
weighted average exercise price of $11.56. Subject to the approval
of the stockholders of Cendant: (1) the Option Plan and existing
grants will be ratified and assumed by Cendant; (2) all existing
grants will be equitably adjusted to become options of Move.com
stock; and (3) the remaining shares available to be issued in
connection with the grant of options under the Option Plan will be
equitably adjusted to become shares of Move.com stock. At December
31, 1999, all issued options remained outstanding but were not yet
exercisable.
Move.com Group utilizes the disclosure-only provisions of SFAS No.
123 "Accounting for Stock-Based Compensation" and applies
Accounting Principles Board ("APB") Opinion No. 25 and related
interpretations in accounting for the Option Plan. Under APB No.
25, because the exercise prices of Move.com Group's employee stock
options are equal to or greater than the estimated fair value of
the underlying Move.com stock on the date of grant, no compensation
expense is recognized.
Had Move.com Group elected to recognize and measure compensation
expense for the Option Plan based on the calculated fair value at
the grant dates for awards under such plans, consistent with the
method prescribed by SFAS No. 123, pro forma net loss in 1999 would
have been $15,199.
The fair values of the stock options are estimated on the dates of
grant using the Black- Scholes option-pricing model with the
weighted average assumptions for options granted. The weighted
average assumptions in 1999 for dividend yield, expected
volatility, risk-free interest rate and expected holding period
were zero, 60%, 6.4% and 6.2 years, respectively. Forfeitures are
recognized as they occur.
The weighted average grant date fair value of Move.com Group stock
options granted during the year ended December 31, 1999 was $7.28.
12. SUBSEQUENT EVENT
On January 1, 2000, Move.com Group entered into an Internet
Cooperation Agreement with Getko Group, Inc., a wholly owned
subsidiary of Cendant, which owns the right to the Welcome Wagon
brand name. Under the terms of the agreement, Move.com Group will
develop, host and maintain the Welcome Wagon area of move.com in
return for an escalating percentage of Getko's revenue and
expenses.
On January 27, 2000, Move.com Group announced a strategic alliance
with AltaVista, a new-media and commerce network, to create a
co-branded real estate channel on the AltaVista Web site. Under the
terms of the agreement, Move.com Group will pay AltaVista up to $40
million to be an exclusive real estate content provider of the new
AltaVista Real Estate Channel. In addition, the move.com network
will be exclusively featured through banners and links on keyword
searches for most real estate and moving related terms. The
agreement has a three year term.
<TABLE>
<CAPTION>
============================================================= ==========================
<S> <C>
No dealer, salesperson or other person is authorized to give
any information or to represent anything not contained in
this prospectus. You must not rely on any unauthorized Shares
information or representations. This prospectus is an offer
to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do
so. The information contained in this prospectus is current MOVE.COM
only as of its date. COMMON STOCK
CENDANT CORPORATION
-----------------
TABLE OF CONTENTS
PAGE
Prospectus Summary............................4 _________________
Risk Factors.................................12
Forward Looking Statements; Market Data......28
Where You Can Find More Information..........28
Use of Proceeds..............................29 [MOVE.COM LOGO]
Dividend Policy..............................29
Capitalization...............................31
Selected Financial Data of Move.com Group....33
Management's Discussion and Analysis of _________________
Financial Condition and Results of
Operations of Move.com Group...............34
Business.....................................41
Move.com Group Management....................55 GOLDMAN, SACHS & CO.
Certain Transactions.........................59
Description of Capital Stock.................61
Material United States Federal Income
Tax Considerations.........................81
Legal Matters................................84
Experts......................................84
Underwriting................................U-1
Illustration of Terms.......................I-1
Index to Financial Statements ..............F-1
============================================================= ==========================
</TABLE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the costs and expenses, other than
underwriting discounts and commissions, to be incurred in connection with
the offering described in this Registration Statement, all of which will be
paid by Cendant Corporation. All amounts are estimates, other than the SEC
registration fee, the NASD fee, and the NYSE listing fee.
SEC Registration fee.......................... 39,600
NASD fee ..................................... 15,500
NYSE listing fee.............................. *
Accounting fees and expenses.................. *
Legal fees and expenses....................... *
Director and officer insurance expenses....... *
Printing and engraving expenses............... *
Transfer agent's fees and expenses............ *
Blue sky fees and expenses.................... *
Miscellaneous expenses........................ *
Total.................................. $
========
*To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law, as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for
a breach of fiduciary duty as a director, except where the director
breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment
of a dividend or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit.
Section 145 of the DGCL empowers a Delaware corporation to
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of the fact that
such person is or was a director, officer, employee or agent of such
corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding, provided that such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interest of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. A Delaware corporation may indemnify
directors, officers, employees and other agents of such corporation in an
action by or in the right of a corporation under the same conditions,
except that no indemnification is permitted without judicial approval if
the person to be indemnified has been adjudged to be liable to the
corporation. Where a director, officer, employee or agent of the
corporation is successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to above or in defense of any claim,
issue or matter therein, the corporation must indemnify such person against
the expenses (including attorneys' fees) which he or she actually and
reasonably incurred in connection therewith.
Section 174 of the DGCL provides, among other things, that a
director, who willfully or negligently approves of an unlawful payment of
dividends or an unlawful stock purchase or redemption, may be held liable
for such actions. A director who was either absent when the unlawful
actions were approved or dissented at the time, may avoid liability by
causing his or her dissent to such actions to be entered in the books
containing the minutes of the meetings of the board of directors at the
time such action occurred or immediately after such absent director
receives notice of the unlawful acts.
The Registrant's By-Laws contain provisions that provide for
indemnification of officers and directors and their heirs and distributees
to the full extent permitted by, and in the manner permissible under, the
DGCL.
As permitted by Section 102(b)(7) of the DGCL, the Registrant's
Amended and Restated Certificate of Incorporation contains a provision
eliminating the personal liability of a director to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a
director, subject to certain exceptions.
The Cendant Corporation maintains, at its expense, a policy of
insurance which insures its directors and officers, subject to certain
exclusions and deductions as are usual in such insurance policies, against
certain liabilities which may be incurred in those capacities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement:
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
*1.1 Form of Underwriting Agreement
*3.1 Form of Amended and Restated Certificate of Incorporation, to
be filed with the Delaware Secretary of State prior to the
completion of this offering
*3.2 Amended and Restated By-Laws of the Registrant
*4.1 Form of Move.com Common Stock Certificate
*5.1 Opinion of Eric J. Bock, Senior Vice President, Legal of Cendant
Corporation
*8.1 Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP
*10.1 Internet Cooperation Agreement between CompleteHome Operations,
Inc. (now Move.com Operations, Inc.) and Century 21 Real
Estate Corporation dated October 1, 1999 (Incorporated by
reference to Cendant Corporation's Form 10-K/A for the fiscal
year ended December 31, 1998 - Exhibit 10.39).
*10.2 Internet Cooperation Agreement between CompleteHome Operations,
Inc. (now Move.com Operations, Inc.) and COLDWELL Banker Real
Estate Corporation dated October 1, 1999 (Incorporated by
reference to Cendant Corporation's Form 10-K/A for the fiscal
year ended December 31, 1998 - Exhibit 10.40).
*10.3 Internet Cooperation Agreement between CompleteHome Operations,
Inc. (now Move.com Operations, Inc.) and ERA Franchise
Systems, Inc. dated October 1, 1999 (Incorporated by
reference to Cendant Corporation's Form 10-K/A for the fiscal
year ended December 31, 1998 - Exhibit 10.41).
*10.4 Internet Cooperation Agreement between Move.com Operations, Inc.
and Getko Group, Inc. dated January 1, 2000.
*10.5 Internet Cooperation Agreement between Move.com Operations, Inc.
and Cendant Mortgage Corporation dated February ___, 2000.
*10.6 Correspondent Mortgage Services Agreement between Move.com
Mortgage, Inc. and Cendant Mortgage Corporation dated February
___, 2000.
*10.7 Computerized Loan Origination System Agreement between Move.com
Mortgage, Inc. and Cendant Mortgage Corporation dated
February ___, 2000.
*10.8 Online Mortgage Broker Agreement between Move.com Operations,
Inc. and Cendant Mortgage.
*10.9 Intercompany Services Agreement between Move.com Operations,
Inc. and Cendant Corporation.
23.1 Consent of Deloitte & Touche LLP (Parsippany, New Jersey)
23.2 Consent of Deloitte & Touche LLP (San Francisco, California)
23.3 Consent of KPMG LLP
23.4 Consent of Eric J. Bock, Senior Vice President, Legal of Cendant
Corporation (included in Exhibit 5.1)
*23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 8.1)
24.1 Power of Attorney (contained on the signature pages of this
Registration Statement)
- -------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
None.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the provisions described
in Item 15, or otherwise, the Registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification by the
registrant against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
pubic policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act, and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act, that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Cendant
Corporation certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on
the 14th day of February, 2000.
CENDANT CORPORATION
By: /s/ James E. Buckman
________________________________________
Name: James E. Buckman
Title: Vice Chairman and General Counsel
Each person whose signature appears below hereby constitutes and
appoints James E. Buckman and Eric J. Bock, and each of them, his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all (i) amendments (including post-effective
amendments) and additions to this Registration Statement and (ii)
Registration Statements, and any and all amendments thereto (including
post-effective amendments), relating to the offering contemplated pursuant
to Rule 462(b) under the Securities Act of 1933, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully
to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents
or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Henry R. Silverman
------------------------------------ Chairman of the Board, President, February 14, 2000
(Henry R. Silverman) Chief Executive Officer and Director
/s/ James E. Buckman
------------------------------------ Vice Chairman, General Counsel and February 14, 2000
(James E. Buckman) Director
/s/ Stephen P. Holmes
------------------------------------ Vice Chairman and Director February 14, 2000
(Stephen P. Holmes)
/s/ Michael P. Monaco
------------------------------------ Vice Chairman and Director February 14, 2000
(Michael P. Monaco)
/s/ David M. Johnson
------------------------------------ Senior Executive Vice President and February 14, 2000
(David M. Johnson) Chief Financial Officer (Principal
Financial Officer)
/s/ Jon Danski
------------------------------------ Executive Vice President and Chief February 14, 2000
(Jon Danski) Accounting Officer (Principal
Accounting Officer)
/s/ John D. Snodgrass
------------------------------------ Director February 14, 2000
(John D. Snodgrass)
/s/ Leonard S. Coleman
------------------------------------ Director February 14, 2000
(Leonard S. Coleman)
/s/ Martin L. Edelman
------------------------------------ Director February 14, 2000
(Martin L. Edelman)
/s/ Dr. Carole G. Hankin
------------------------------------ Director February 14, 2000
(Dr. Carole G. Hankin)
------------------------------------ Director February 14, 2000
(Robert D. Kunisch)
------------------------------------ Director February 14, 2000
(The Rt. Hon. Brian Mulroney,
P.C., LL.D)
------------------------------------ Director February 14, 2000
(Robert W. Pittman)
/s/ Leonard Schutzman
------------------------------------ Director February 14, 2000
(Leonard Schutzman)
/s/ Robert F. Smith
------------------------------------ Director February 14, 2000
(Robert F. Smith)
/s/ Robert E. Nederlander
------------------------------------ Director February 14, 2000
(Robert E. Nederlander)
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Cendant Corporation on Form S-3 of our report dated January 7, 2000,
appearing in the Annual Report on Form 10-K/A of Cendant Corporation for
the year ended December 31, 1998 (which expresses an unqualified opinion
and includes an explanatory paragraph relating to a preliminary agreement
to settle the principal securities class action as described in Notes 18
and 27, and the change in the method of recognizing revenue and membership
solicitation costs as described in Note 2) and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 14, 2000
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Cendant Corporation
("Cendant") on Form S-3 of our report on Move.com Group (wholly owned by
Cendant) dated February 1, 2000 (which expresses an unqualified opinion and
includes an explanatory paragraph relating to the relationship of Move.com
Group to Cendant) appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
San Francisco, California
February 14, 2000
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
PHH Corporation:
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of Cendant Corporation of our report dated April 30, 1997, with
respect to the consolidated statements of income, shareholder's equity and
cash flows of PHH Corporation and subsidiaries (the "Company") for the year
ended December 31, 1996, before the restatement related to the merger of
Cendant Corporation's relocation business with the Company and
reclassifications to conform to the presentation used by Cendant
Corporation, which report is included in the Annual Report on Form 10-K/A
of Cendant Corporation for the year ended December 31, 1998. We also
consent to the reference to our firm under the heading "Experts" in the
Registration Statement.
/s/ KPMG LLP
Baltimore, Maryland
February 14, 2000
